All too often we are quick to reach for our credit cards to make a purchase without regard to the implications. Those implications would be running up debt, getting hit with finance charges and paying more for an object that originally intended. On the other hand, sometimes it is far more convenient to whip out a credit card as opposed to coming up with the cash. This swings back to the question posed in the headline, “How many credits cards should we really have?”
One Card to Rule Them All
It is important to establish a credit history. This will set you up for bigger purchases such as a car or home. When you can prove you pay your bills on time, then lending institutions will be more inclined to fork over some of their cash. Translation — get a credit card, but you don’t need to get every credit card.
You’ll find that once you’ve set up your first credit card, you’ll be flooded with enticing offers for more credit cards. It’s as if the credit card companies are all sharing your mailing address. Guess what? They are. However, just because you get all those invitations doesn’t mean you have to RSVP with a “yes.” A single credit card with a low balance and solid payment history is all you should strive for to build up your credit history.
Plan Your Spending
Your household budget should dictate how much money you spend on average each month. What’s that, you say? You don’t have a household budget? Now is the time to embrace that tool. You might find there are regular purchases such as gas, food and sundries that could be bought with your credit card. These small amounts would be easy to pay off at the end of the month, especially if you’re buying within your means.
If you have a lot of business expenses you’re reimbursed for, then it might be wise to add a separate card just for those purchases. That way it will be easy to turn in expense reports, and you won’t have to justify personal expenditures, i.e. stuff you don’t want your boss to know you’re buying. We’ve all been there.
“Just In Case” Isn’t a Good Case
Some people feel they should have an extra credit card “just in case.” That would be “just in case of an emergency” like a sudden need for a home repair or weekend trip to Vegas. It happens. However, holding onto a card without using it could be a problem. Lenders like to know you’re responsible, but that means showing your responsibility. Just having credit that is never used only proves you’ve got will power.
Instead, concentrate on building up an emergency fund through your savings. That way you can pay with cash for the bulk of the purchase. If need be, you can supplement the expenditure on credit. Just remember, every time you swipe that card, you’re going to be charged interest. The moment you don’t pay off your balance, you’ll begin accruing charges. That is money that could be in your emergency fund.
Debit Instead of Bucks
Finally, we have access to a great shopping tool at our disposal — debit cards tied to our bank accounts. That allows us the convenience of swiping without the burden of finance charges. Using a debit card won’t impact your credit score one way or the other. However, it can help you avoid constant trips to the ATM and keep you on track with your monthly budget. As Teddy Roosevelt would say, “Bully!” See how that came back?