How many credit cards should I have in Canada or United States or any country for that matter? Do you ponder over this question? If yes, let’s try getting an answer to this tricky yet useful query.
Who would have thought that a small rectangle card can be of such great use? Yes, we are talking about Credit cards. With use comes a lot of mystery and a little angst.
When you search the internet, you will not find a single answer to the question that properly explains how many of these one should possess. Actually it depends on the consumers and their spending habits. Having a credit card is a responsibility.
An individual 18 years or older living in Canada or USA, can apply for a credit card. A big number of people in Canada/USA who depend on credit cards for their financial needs. There is nothing wrong with it, because the salaried class has to have a source of finance until the salary comes, right? And, the business owners need more credit at their disposal. So, a credit card comes to our rescue when we fall short of cash or have immediate expenses to occur.
Now, Let’s dive in straight and learn the answer to it..
How many Credit cards should you have?
Well, there are no rules as such about the number of credit cards that a person can own. You can have one or five or even ten credit cards. However, there are certain implications of having a credit card.
There isn’t a one-size-fits-all solution for the total number of credit cards you should own. But, it’s somewhat a better idea to have 2-3 active credit card accounts offering a variety of benefits in the form of cashback, bonus, rewards, etc. After all, you might have other types of credit such as a student loan, auto loan or a big mortgage to bear as well. So, keep it as simple and manageable for yourself!
Just keep in mind, how you use your credit card and how often you clear your dues holds more importance than the number of credit cards you own. Make sure to keep up with your existing monthly payments before you think of applying for a new credit card.
Making regular payments towards your credit card will help him maintain a steady credit score. Be it a normal lender or a financial institution like a bank, everyone will check the financial reliability of the person by looking at his credit score.
It is a great way to improve your credit worthiness and score. Many of you might be thinking that having more than one card means you can improve the score faster. Unfortunately, this isn’t true! What matters is how you utilize credit available to you.
On the other side, not having any credit card means that your financial profile will not be available for assessment. Especially for newcomers to Canada, getting approved for a good credit card can help you in building your credit profile. The next time you will need a mortgage or any form of credit, it will become easier! Right!
What if I have more than one Credit card?
What if you have more than one credit card? Is it good? Or is it bad? Lots of questions but no clarity. Here is something that can help you.
If you hold multiple credit cards, this can indirectly impact your credit scores. How? It can lower your debt to credit ratio . i.e. your credit utilization rate.
You may also explore How to save for Down Payment to Buy a Home in Canada?
What is Credit Utilization Rate?
Your credit utilization rate refers to the amount of credit that you use in comparison to the total credit available to you. When you apply for a mortgage or additional credit, lenders prefer a credit utilization rate below 30 percent. A rate of 30 percent or higher can negatively affect your overall credit scores. So, you must be very careful while using your credit card.
The main deal with the number of credit cards is that you must know how to make the best combination and use them accordingly.
Benefits of Having Multiple Credit Cards
Try to anticipate your financial needs, future expenses and then take the decision about buying one or many credit cards. But if you are struggling on getting a single plastic piece, then here are some benefits to help you.
1. More Rewards
Did you know that 58% of the people in Canada have credit cards to earn loyalty points and reward points. There are so many stores in Canada that provide points and free stuff when you buy using a card. You can use any of these: travel credit cards, no foreign fee card and a low interest credit card.
For example: Some of the Canadians use CIBC dividend Visa to earn a lot of rewards when buying groceries.
2. More Credit
What if you need to buy something and have no money? That is when a credit card comes in handy. It can be your rent or any last minute item. It is one of the most important advantages of it.
3. Improve in the Credit Score
Credit score is related to your utilization ratio. Usually when you use less than 30% of your credit. So when you use the lesser amount and pay it frequently the credit score will increase and you will get the option to buy another card.
Cons of Using multiple Credit cards
1. More Cards means More Bills
Don’t you think it will be chaotic when you have to handle so many statements every month? Some of them will come at the end of the month, some will come in between and all you have to do is make adjustments and pay bills. It is a major disadvantage of having a credit card.
2. More Credit can be bad
The allure of a credit card can become negative after a certain point of time. People do not think twice before purchasing something with a credit card. Adding more and more burden at the month end can become a major financial setback.
How many Credit Cards should you have?
Every data and survey will give different results, but on an average most of the Canadians have more than a single plastic card. The ultimate aim should be focused on estimating the financial position of a person before getting a credit card.
Having a credit card gives you more purchasing power, but it’s upto you to use it wisely. Don’t fall into the credit card debt trap! Avoid paying high interest rates or late fees for missing a payment. Learn to pay off your credit card balances that too in full each month instead of only making the minimum payment.
Spend only that much via a credit card that you can easily settle at the month end. Otherwise interests and late payment fines will make it extremely difficult for you. Now, if you keep note of these crucial points along with your credit needs and financial situation, you can definitely make the best use of a credit card.
If you are a new immigrant, you may also like to explore Financial Checklist for Newcomers in Canada
If you think having more than one credit card is helpful, then comment down the reasons. Also share how many Credit cards you have!