This is a question I get quite often… The people I consult usually have quite a lot of credit cards – Some of them have so many that they forgot some of them exists. Naturally, it is easier to track less credit cards balance than more – therefore if you want to have full visibility on your finances, it would be easier to have less than more. But how many?
As usual when it comes to a financial decision, the answer is: It depends! Lets list the different factors:
- First, lets see why it is good to have multiple cards:
The benefits that a single card can give you vary:
- Frequent flyer miles (or points)
- Discounts for specific things
- Free (or discounted) entrances to places
- Reduced rate for exchanging currency
- Having multiple cards can create backup in case one does not function
- Some businesses do not except certain type of credit cards so having multiple credit cards basically means having “full coverage”
On the bad side:
- Each card has a minimum amount you need to spend on it every month/year
- Each card has a monthly fee after an initial period
And there is the additional management overhead:
- Each card is charged differently and paid on a different date from your bank account
- Each card expenses is listed on a different website
- Each card requires you to maintain another account in balance
Once you have these factors in mind you can evaluate appropriately how many credit cards you should have and which ones.
My rule of thumb is a credit card per person in the household and additional one for fixed payments (bills, insurance, etc.). That way you know exactly where to look if your were over charged in your bills.
Also, every person holding a credit card should be responsible to update all expenses that were made.