mycapitalonecard spread in small increments across too many cards isn’t the way to go. According to CardWeb.com, the recommended number of credit cards for the average consumer is three. At most four, if you use a card for business expenditures. And one of those cards should only be kept for emergencies.
The reason for this? Preservation of your interest rates and your credit score. Not to mention your sanity.
30% of your overall credit rating is determined by how much debt you carry. The ideal picture of your debt: Low balances spread over several different types of accounts, like a mortgage, a student loan, and a few credit cards.
The longer your established credit history, the better. Lenders look at the length of time you’ve responsibly used credit as part of your overall rating.
Opening a new credit account won’t necessarily damage your credit score, but a balance carried on a new card is not considered ‘seasoned’ debt and will not weigh in as heavily on your overall credit worthiness.
Opening many accounts at once is rated as a risky behavior, and will reflect negatively on your score.
The average credit card holder spends about $500 per month on credit card interest.
Another danger in carrying six or seven balances: Credit card companies routinely scan your credit report to watch for signs of financial trouble. If just one of your accounts becomes delinquent, or if you suddenly revolve a balance at or near the maximum, this could induce your other lenders to raise their interest rates. Your interest payments could skyrocket. Higher interest rates on one card will increase your annual payment significantly- interest rates hiked on five cards adds years to the time it would take you to pay them.
The average household receives more than one credit card solicitation per week.
Credit card companies want your business, and will spend $80 - $200 to acquire it. And its no wonder- in the US, we owe $785 billion in credit card debt, according to data analyzed by Cardweb.com. That’s about $9000 of credit card debt per card-carrying household in the US. All that interest we’re paying contributes to the lender’s profits.
Note that $785 billion is just the amount of credit card debt; the actual figure for Americans’ non-mortgage debt is $2 trillion. This number accounts for school loans, car loans, and any other loan you can think of across the range of good to bad debt.
There are about 6,000 general purpose credit card companies in the US, mostly credit unions. That’s a lot of options. Credit can be a great tool when used the right way.
So get your boutique-cards down to a minimum. They are not versatile, they can’t help you in an emergency and they don’t earn miles. Remember if you ever close an account to be sure the lender marks it ‘closed by account holder.’ Keep a few general-purpose cards and leave it at that. And keep the balances low
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