How Many Credit Cards Should You Have?

How Many Credit Cards Should You Have?

Americans should be ecstatic with the recent news that they’ll be saving about $5 billion in bank fees in 2010 thanks to new credit card and overdraft restrictions. But before you go celebrating by opening up a Macy’s gift card, you should take a hard look into your wallet and see how much plastic you already have.

If your wallet is thick enough to stop a bullet, then you need to evaluate things. Unless, of course, you’re strapping it over your heart. Then "“ and only then "“ it’s completely understandable.

The average American owns two credit cards, which is actually the best number to have. The average American is also around $3,000 in debt "“ obviously not good. If you’re one of the many Americans affected with severe credit card debt, then that’s a post for another day. However, if you have very manageable debt and just want to reduce the amount of cards you carry around, then you’ve come to the right place.

Trimming the fat

It doesn’t matter how much you love a store, no one in their right mind shops at just one store. If all your clothes are from one store and you’re not (a) getting it for free or (b) getting paid to do it, then you should really go see a therapist. Sure, brand loyalty is understandable, but this is brand psychosis.

With that said, try and eliminate any and all store credit cards. Sure, they roped you in with the guise of discounts — chances are you signed up for an up-front discount "“ but, if you’re keeping a balance on the card, the store will more than likely make that money back through the interest you’re paying.

Picking the right credit cards

Once you have those pesky store cards out of the way, it’s time to cut down the big boys (i.e. MasterCard, Visa, etc.) based on two factors: credit limit and what your card can do for you.

Tackling credit limit, the first of your two credit cards should have a low, manageable limit "“ preferably no more than 2-5 percent of your annual net salary. This will be the card you use most often "“ for clothes, groceries, online purchases, issues of Playboy with Tiger Woods’ mistresses, etc. "“ and you should be able to pay off its balance month-to-month.

Your second credit card will have a higher limit "“ no more than 10-15 percent of your annual net salary "“ and will be used for significant purchases, such as appliances, exotic vacations, call girls or exotic vacations with call girls. You should be able to pay off this card gradually, but preferably within the year.

Make your cards work for you

Once you’ve established your credit limits, you have the option of picking the type of credit cards you want. For instance, if you drive a lot and are constantly filling up your tank, maybe a card with gas-related rewards would be best for you. Or, if you’re constantly traveling, a card that gives airline miles can suit you.

Again, this is only optional and it is highly recommended that you do your research because some of these reward cards can have the same consequences as store cards in which the interest you pay outweighs most of the rewards.
Now you’re ready to sport a wallet that can fold up and fit in your purse, wallet or man-purse (if that’s how you roll). Just be sure not to strap it to your chest, because it’s no longer gong to stop bullets. Sorry.