How Many Credit Cards Do You Need For Personal Expenses?

Thinking about opening a new credit account? Check out these guidelines to see if you really need another card to enhance your buying power.

Many of us are inundated by credit card offers in the mail, on the Internet, and by telephone. Credit card debt in the United States has reached an all-time high with a record number of individuals using--and abusing--credit card accounts. Similarly, bankruptcies likewise have increased, while the average income has grown just slightly over the past few years.

Many people get their first credit card while in their twenties. Financially savvy consumers tend to use just one, and that sparingly. If you are thinking about applying for a new (or another) credit card, here are a few thoughts to keep in mind before signing the application on the dotted line.

If your application for a credit card is accepted and you receive a credit card for personal use, you don't have to necessarily use it. Treat a credit card as you would an insurance policy--to be used only when needed. And some people have trouble differentiating between a "need" and a "want."



One card ought to be enough to cover most significant credit purchases. Keep your credit limit to $1,000 or less so you won't be tempted to charge even more.

Decide what your actual charging needs will be. For example, will you charge groceries each month or only for a New Year's Eve party? Do you plan to pay for your gasoline by credit or fund a down payment for a new car through a cash advance? Limit your reasons for using credit to avoid racking up thousands of dollars in needless purchases.

However, if you travel for your company or provide up front resources that are later reimbursed, you may want a second "business" charge card for company-related expenses. That way you can separate professional from personal spending activity. Avoid using either for undesignated purchases.

If you decide to drop your existing card for a new one with a lower rate, know that the credit card application you submit probably authorizes the company to check your credit report. The more applications you process, the more often your credit report gets accessed, and these show up on your account with potentially negative consequences. So think twice before opening a new account unless the interest rate or terms are significantly better than those you currently have.

To avoid relationship as well as financial problems, never co-sign a credit account with a family member or friend. (A spouse, of course, is a different story.) Don't be pressured into sharing a credit account with anyone else. Their spending problems will become your problems.

For similar reasons, don't co-sign a credit card for your teenager unless you plan to closely supervise its use as a teaching device. Most parents don't have the time or inclination to check their child's use of a credit card, but failure to do so may lead to uncontrolled use that will impact both you and teen in negative ways.

In summary, then, a single credit card for rare purchases may be a useful tool. But use it carefully for constructive outcomes.

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