If you're new here, you may want to subscribe to the Payday Loan INsight RSS feed. Thanks for visiting!
How many credit cards do you need? There is no one correct answer to this question. However, as few as possible is really the best advice - it is easy to go overboard with credit and common sense tells you to keep spending on credit under control. You know as well as I do that common sense isn’t always what dictates the decisions people make though. There is a culture of instant gratification in this country - and while there is nothing inherently wrong with spending, there is with letting credit cards spending get out of control.
Credit cards are both a blessing and a curse for consumers - here are some important facts:
Fact # 1: The average cardholder has 7 cards: three issued by their bank and four from stores or gas stations. (statistic from www.cardweb.com)
Fact # 2: 60% of U.S. households account for as much as 560 billion dollars in credit card debt. This breaks down to an average of $11,000 per household. (Testimony by Robert Manning to the U.S. Senate Judiciary Committee)
Fact # 3: Minimum payments are low - why? When only small payments are made by the cardholder monthly, the consumer carries more debt over to the next month - and this means more income from interest payments for the credit card companies. Ask yourself: who makes out better from low minimum payments?
Fact # 4:This fact comes from Jim at Blueprint For Financial Prosperity. Like cable and phone companies, credit card companies want to keep your business and will make concessions in order to retain you as a customer. If your interest payments are too high, call your credit card company - they will very often lower your interest rate.
Fact # 5: There is a link between debt and depression. Studies (cited by Franklin Galvin, Secretary of the Commonwealth of Massachusetts) have shown that students who have over $1,000 in credit card debt have higher rates of drinking, smoking and are far more likely to be medicated for depression.
You’ve got those facts to mull over. Let’s go back to the question of how many credit cards you really need. If we had our way, we’d make it illegal for individuals to carry more than two credit cards. But we’d be banished from this land if we ever campaigned for it.
The point is, it’s really no one’s business how many credit cards you have. It may make your financial planner frown or your banker wince, but no one can tell you to cut up your excess credit cards.
If we may propose something - If you’ve got more than two cards, why not lock up the excess cards in a secure place to keep temptation at bay? Another idea - When your statement comes each month, make a payment larger than the minimum. After all, the idea is to get out of debt and this will make things happen faster.
Christmas is almost here. You’re at liberty to use your credit cards in any matter you want. This is the time of the year where everyone uses credit cards without holding back or thinking twice since the holidays always put us in a cash crunch. But do yourself a little favor. For your New Year’s resolution, how about making a promise not to use your credit card more than once a month? This is like imposing some kind of military-like discipline, but then again, everyone agrees that uncontrollable credit can be compared to a cobra with a poisonous venom.
Just two more facts for you: U.S. cardholders charge as much as 1.8 trillion dollars every year. 1.8 trillion dollars - just think about that number for a minute. 11% of American cardholders pay interest rates of more than 25%! Both of these figures come to us from the U.S. GAO (General Accounting Office).
It’s time for all of us to take a hard look at the way we use credit cards. Perhaps this can lead to some changes in the way we spend.
One of the greatest things you could have is freedom from debt. Just think about the figures we’ve given you in this article and we think you’ll agree with us. Make getting out of debt your top priority for 2008.
While we would advise having no more than two credit cards, we know that this is simply not going to happen for many. If you can control your spending and keep a grip on your payments, then you can have as many cards as you would like. However, try not to take your cards shopping with you - if you can’t just pull out that card and buy anything anytime, you’ll be keeping yourself out of a lot of trouble. You probably don’t need it that bad anyway.
Patience is a virtue - wait to make those non-essential purchases until you can make them with cash. Don’t be too surprised if you don’t even want them anymore by the time you can pay cash. Best of all, you’ll be helping to keep yourself out of debt.