Tag Archives: cards

 

Mar14

Can You Have Too Many Credit Cards?

Posted: March 14, 2019 by Rachel Shepard

With some things, it’s easy to tell when you have enough. Once your stomach is full, for example, you know you’ve probably hit the acceptable limit on pizza slices. With other things, however, it’s harder to tell if you have enough — or too many.

 

For many people, credit cards can fall into that latter category; with literally hundreds of credit cards out there, it can be hard to tell when you’ve hit the cap on how many cards you should have in your wallet. And it can get even harder to know your limit when you keep receiving offers in the mail promising big signup bonuses, low rates, or other tempting perks.

 

Technically, There Is No Credit Card Cap

 

Part of what makes it hard to know when you have too many credit cards is that it’s really a personal decision. Technically, there is no legal limit on how many credit card accounts you can have open at once. If you meet the qualifications for a given credit card and can get approved for it, you can have it — regardless of how many other credit cards you’ve already opened.

 

Each New Card Can Impact Your Credit

 

Of course, there is a lot of room between “can” and “should,” especially when it comes to your finances. Just because you can open an unlimited number of credit cards doesn’t mean that you should open a new card.

 

For one thing, opening new credit card accounts can have significant impacts on your credit profile. Each new credit card application you submit — whether you’re approved or not — will result in a hard credit inquiry on your credit, which can ding your credit score through the “new accounts” factor, which is worth up to 10% of your score.

 

Plus, new credit card accounts will be factored into your average account age, which can be worth up to 15% of your credit score. Each new account will reduce your average account age and potentially decrease your scores.

 

On the other hand, new credit cards can help improve your utilization rate by increasing your overall available credit — assuming you don’t run up a balance on your new card. Overall, the impact to your credit scores from opening a new card will depend mostly on your credit profile; the older and more diverse your credit is, the less impact you’ll likely see — in either direction — from opening a new card.

 

Some Issuers Have Card Limits

 

Although the law doesn’t cap the number of credit cards you have, some credit card issuers will places limits on how many cards you can have from their banks. For example, American Express reportedly limits cardholders to five American Express credit cards at any given time; applications for additional cards are likely to be denied.

 

Other issuers will set limits on how often you can open new cards. Chase, in particular, is notorious for its 5/24 Rule that means you can’t open a new Chase credit card if you have opened five or more credit card accounts in the past 24 months.

 

Furthermore, some card issuers will put a cap on how much credit you can be extended. If you already have several cards from a given issuer, for instance, you may not be able to open another card because you’ve reached the limit on how much credit the issuer is willing to offer you.

 

Only Open Credit Lines You Can Handle Responsibly

 

At the end of the day, the primary barometer for whether you have too many credit cards will come down to how many credit cards you can handle responsibly at one time. If you have so many credit cards that you can’t keep track of due dates and wind up carrying a balance or making late payments, then you have too many cards.

 

In general, having at least one credit card account open and in good standing is recommended for good credit. When used responsibly, credit cards can help build a positive payment history, improve your credit mix, and show that you can properly handle a revolving credit line.

 

That being said, for some folks, the right number of credit cards may actually be zero. If you’re unable to resist the temptation to overspend when you use plastic, then you may be better off avoiding credit cards entirely.

 

At the other end of the extreme, some cardholders have literally hundreds of credit cards — and they manage to have good credit scores, too. If you can keep track of all your credit card fees, balances, due dates, and other particulars, then the proverbial sky is the limit on how many credit cards is too many.

 

Tags: ,

Read More

Nov06

Can Credit Cards Save You Money?

Posted: November 6, 2018 by Rachel Shepard

Although it can be easy to forget as we’re swiping away, credit cards are a form of debt; the balance you build on your credit card is debt you owe to the issuing bank.

 

Given that they are debt and, by nature, debt is a negative, it may seem counterintuitive to consider that credit cards may actually help you save money — but they can. Everything from earning rewards to easy access to reusable financing can help you save money simply by using the right credit card.

 

Of course, it takes smart credit card use and responsible financial behaviors to make the most of your credit cards’ money-saving potential. No matter how strategic your plan, irresponsible use of credit cards will likely cost you more than you can save.

 

Purchase Rewards Can Be Very Valuable

 

The most obvious way your credit cards can save you money is through purchase rewards. The majority of prime credit cards — and even several subprime cards — now offer rewards programs that provide cash back, points, or miles on all of your net new purchases.

 

Most rewards credit cards have a flat unlimited rewards rate (1% to 2% is standard) that applies to every purchase. However, many rewards cards these days also have set bonus categories that provide higher rewards rates for category purchases. For example, a travel rewards credit card might offer triple points for travel-related purchases like airfare or hotel stays.

 

The best way to maximize your credit card rewards is to choose a credit card that offers bonus rewards for the purchases you make most often. If most of your budget goes toward groceries, for instance, choose a card with a high bonus rewards rate for grocery store purchases.

 

Although most credit card rewards are paid for by the interchange fees that issuers charge merchants for each transaction, many high-rate rewards cards will also charge high annual fees. Subprime rewards cards can also charge a variety of fees, so pick a credit card with no or low fees, like the ones on this list.

 

You’ll also want to be sure to pay off your purchases well before you start accruing interest fees to ensure your earnings stay in your pocket, rather than going right back to the bank. Even the most lucrative rewards credit card won’t provide enough in rewards to make paying big interest fees a good idea.

 

Issuer Portals Can Unlock Exclusive Discounts

 

In addition to purchase rewards, your credit card may also give you access to the credit card issuer’s online shopping portal. Offered by most major banks, issuer shopping and discount portals can contain exclusive coupons and discounts for tons of popular brands, as well as special offers for extra bonus rewards on partner purchases.

 

How the shopping portal works will vary by issuer. Some portals provide coupon codes to be entered at the time of sale, some portals use trackable cookies to automatically credit your account, while other portals will simply attach the discount to your card account for online or in-store use.

 

Save On Interest Fees with Credit Card Grace Periods

 

While many occasions call for a long-term installment loan that you can repay over months or years, sometimes you simply need a small loan to get you through the next two weeks. Rather than turn to expensive payday or cash advance loans, you may be able to use your credit card as a means of short-term financing.

 

Given that many payday loans can have APRs in the three digits, using a credit card — even a subprime card with a 30%-plus APR — is already a better deal. But, that deal gets exponentially better when you only need a few weeks to repay your balance. That’s because most credit cards offer a grace period on new purchases to pay off your balance before you start accruing interest fees.

 

Although some cards don’t offer a grace period (most commonly the case with subprime credit cards), cards that do offer one will provide a grace period of at least 21 days, though the full period is generally from the time the transaction posts until the day the bill for that billing cycle is due.

 

One important thing to remember is that the grace period for interest only applies to new purchases. Other transaction types, such as a balance transfer or cash advances, won’t qualify for the grace period. The interest fees for ineligible transactions will start to accrue as soon as the transaction posts to your account.

Tags: , , , ,

Read More