Other Credit Card Tips

Helpful hints for card users

How Many Cards do you Need?

The average American consumer holds between five and 10 credit cards. Of course, some people have more and some have less. However, there is no right answer to this question. It all depends on your personal needs, how much you spend and how much you can pay off comfortably. Many financial advisers believe you should own fewer cards but with higher credit limits, rather than vice versa, even if the total credit amount is the same. If you can make payments on fewer cards with higher limits, it will reflect positively on your credit history.

What Should my Balance Be?

When considering the balance on your cards, most credit bureaus view the ideal range to be between 25 and 50 percent of the available credit on each card. If you go over that range, many credit card companies start to see you as a risk. If you have more than one credit card, it’s often wise to even out the purchases on all of the cards instead of loading everything onto one card.

Should I Cancel Cards I don’t Use?

This is sometimes a catch-22 situation. Some creditors view a large number of credit cards as an easy temptation for you to fall into debt. On the other hand, the creditors also look at the total amount of credit that is available to you and what percentage of it you are using. This is your debt-to-credit ratio. For example, if you have $25,000 of potential credit available and a balance of $12,500, you are using 50 percent of your credit. If you cancel a credit card that has a credit limit of $5,000, you now have a $12,500 debt on a limit of $20,000, which represents a debt-to-credit ratio of 62.5 percent. Canceling your oldest accounts could also negatively affect your credit history as creditors prefer to see long histories.

How do I Get Credit History?

Another catch-22 situation involves building a credit history. Specifically, how can you get a credit history if you can’t get a credit card without a credit history? A good solution to this, especially for students, is to sign up for a few merchant-issued credit cards. These could be gasoline retailers or department stores as these companies are more likely to take a risk on somebody with no credit history. Make sure you pay off your debts on time and slowly but surely you’ll start to build a solid credit history. These credit cards could then pave the way for you to become eligible for some major general use credit cards.