My 13 Credit Card Guidelines: How Many to Have, and When to Use Them

How many credit cards should you have? I get this question a lot. My general rule is: If you spend less than you earn each month then one card is always enough, it’s just your limit that might grow. I know everyone’s situation is different. Here are some more specific guidelines I like to give clients on credit cards:

  1. Do not have a lot of cards . It is easy to have “expense seepage” where you just don’t know how much you’re spending each month. One card = one statement = one list of your expenses for you and your partner to see each month.
  2. A good rate is anything below 10% APR.
  3. You don’t need a credit card until you’re a senior in college ($500-1000 limit) to start building credit and good habits.
  4. One credit card when you’re young and single ($1000 limit) to build credit, establish good habits and have for emergencies.
  5. Married couples should share one card (limit $5000, with kids $10,000). Not comfortable sharing a card with your spouse? Think about couples counseling, because you should not be worried about hiding purchases from him/her.
  6. One spouse is a compulsive spender, it may hurt your credit to share a card, but with separate cards, you have no idea how that person is spending, which will doom your overall credit anyway. You need to get help for the compulsive spending spouse not try to protect yourself within you marriage.
  7. Small business or are self-employed, have a separate card for your business and one for your household. Do not charge business expenses on your household card, keep them separate.
  8. Travel for your job and have to wait to be reimbursed, and you cannot get a company credit card, consider getting a “job expenses only” card ($1000 limit) so your reimbursements can be directly applied ot your work expenses and not spent accidentally.
  9. Co-signing for a college aged child is fine if they need a credit card, but make sure the limit is low ($500).
  10. Have several cards? make sure the balance is $0 and put them in a drawer or cut them up. Only use the one with the best terms as your household credit card. Do not cancel the others as it affects your credit score.
  11. Charge big items to get miles, (e.g. refrigerators), if you want, but pay it off in full at the end of the month. If it is tempting not to pay it off, write a check from Rainy Day Savings instead.
  12. Look for no annual fee or a low ($30 or less) annual fee for a miles program. Look for credit union credit cards, because they usually have better terms.
  13. Read the fine print on 0% cards, because they usually have balance transfer or check writing fees and sometimes the 0% rate is only relevant for the first balance transfer and the rest have an interest rate applied.

The key is that you see what you (and your spouse) spend each month and do not get stuck with a lot of fees.

Paying off your balance each month is critical to you sanity, your relationship and your credit score. Nothing causes arguments more than revolving debt…