(Closed) Credit cards

posted 5 years ago in Finances
Post # 2
Member
310 posts
Helper bee

Hey- I’d recommend going to a personal financial advisor, but in the meantime,

1) Yes, there is such thing as too many credit cards. The max you should have is 6, although between 1 and 4 is ideal. NEVER close out your longest standing credit card. You have the longest history with that lender, and try to keep that card in good standing and keep it open.

2) You can keep a balance on them, but I’d make every effort to pay off credit cards every month. In fact I’d make that a rule as to not get in over your head with them. The more important thing to consider with balances is that your balance to limit ratio isn’t too high. For example, if you have a credit limit of $50,000 and always keep about $3,000 on it, it won’t negatively affect your credit score. But if you have the same limit, but keep a balance of $49,000, your credit score will be negatively affected, even if you never go over the limit and always pay your minimums due.

Source: I’m a CPA.

Post # 3
Member
9111 posts
Buzzing Beekeeper

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mylittlebees :  the “too many” question will vary a lot on you. You don’t want a ton of cards with annual fees or more cards than you can easily manage and pay the bill on time. For some people one card is plenty. DH and I like to maximize our rewards and have several cards between the two of us. The more cards you have though the more you have to track. 

Always pay your statement balance in full each month to avoid interest charges. Some people think you need to carry a balance to “help” your credit score but that is totally false. We NEVER pay interest and have 800+ credit scores. One of my favorite cards is the Chase Freedom – no annual fee, solid cash back rewards, and it’s a Visa so it’s accepted pretty much everywhere.

Post # 4
Member
12261 posts
Sugar Beekeeper
  • Wedding: June 2011

1.  Yes, there is such a thing as too many credit cards.  If you try to apply for a loan for a house or car, one of the things they look at is debt to credit ratio along with available credit  If you have too many lines of credit open and could be in that much debt, I believe it does hurt you.  If you have enough cash to back all that credit, it may not be as big a deal.

2.  No, there is ZERO reason to keep a balance unless you like to pay absurd amounts of interest.  Pay it off at the end of every month, and that is all you need to show good credit history.  A balance = debt, never a good thing.

Post # 8
Member
310 posts
Helper bee

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mylittlebees :  No problem! Don’t open any more. If you want to build your credit safely and already have a card, use it for monthly expenses like gas or groceries that are already within your budget. Then pay it off every month. While carrying a low balance won’t actually affect your credit score directly, that’s how they wrap you in- interest adds up like crazy, and people just drown in it. I just helped my fiance over the last year and a half rebuild his credit from about 670- he just checked it this week and it’s 800.

Post # 10
Member
122 posts
Blushing bee

It’s really more about debt utilization than number of cards if you want to build your credit. From a lenders perspective it’s better for you to owe a few hundred dollars on a $10k limit card than a few hundred on a $1k limit card. It would also be easier to manage fewer cards with higher limits. You just need the financial discipline to pay them in full, every month. Never leave a balance.  

 

 

Post # 11
Member
9111 posts
Buzzing Beekeeper

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pinkshoes :  I’m assuming income is also a factor in that equation? We have a boatload of credit available to us and even though we put literally everything on a card for the rewards we never exceed 10% of our available credit. We have never had a problem getting mortgages or car loans. I can understand if someone making $20k a year had $100k in credit that would be risky, but for someone making $200k that same $100k in credit isn’t that unreasonable. 

Post # 12
Member
181 posts
Blushing bee

Last year I had a ~700 credit score, and now I have 800-820 depending on bureau. I’ve gotten that by taking the time to avoid carrying any balance on a range of credit cards. Legitimately, I don’t even have copies of most of my cards. I have 16 but I only use 2 and pay them off monthly. While it’s true that a range of credit is best (I have closed school loans that look good), in general I’ve noticed more credit cards that you NEVER carry a balance on look best. If you carry a balance on ANY credit cards, you’re risking (a) losing money on interest, (b) lowering your credit score.

 

As PP have said, length of history is also helpful. Ask your parents if they have long-term cards they can put you on — you won’t even need your own card, but adding your name adds history length and credit limit. My brother and sister have always had near-perfect scores because my mom took out store credit on their names around their birth dates so their histories go back decades.

Post # 13
Member
106 posts
Blushing bee

We just got our first ‘real’ credit card after having a secured card only for several years. We always pay the balance off every month and plan to do so with this new card, which offers some cash back. I wanted to pay most if not all of our monthly bills, mortgage included, on the new card to get as much cash back as possible. But that means we’d be using quite a bit of the balance that’s available to us so I worry our debt to limit ratio (if that’s the right term here) would be very high and therefore negatively affect our credit. Does anyone happen to know if that’d be the case, even with us paying off the balance in full every month? If we can’t spend enough on the card to get a decent amount of cash back, I’m not sure the benefit to having a cash back credit card at all.

(Thanks OP for starting this thread! Some good info here.)

Post # 14
Member
12261 posts
Sugar Beekeeper
  • Wedding: June 2011

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LilliV :   Of course.  Cash or income to back whatever credit you have.  Everythign is part of the equation.  

Post # 15
Member
310 posts
Helper bee

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binpink :  If you pay off the balance every month, running it up every month will NOT hurt the ratio. A high REVOLVING balance, however, will hurt your credit score. That’s the balance that’s unpaid at the end of a billing cycle. 🙂

Edit: I have to add of course if you go OVER your limit by accident during any time, that does affect your score.

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