American carry an average of 2.7 bank credit cards, 3.8 retail credit cards, and 1.1 debit cards, which averages to 7.6 cards per cardholder.
According to CardWeb.com, the recommended number of credit cards for the average consumer is 3. At most 4, if you use a card for business expenditures. And one of those cards should only be kept for emergencies.
The reason for this?
Preservation of your interest rates and your credit score. Not to mention your sanity.
30% of your overall credit rating is determined by how much debt you carry. The ideal picture of your debt: Low balances spread over several different types of accounts, like a mortgage, a student loan, and a few credit cards.
Another danger in carrying 6 or 7 balances: Credit card companies routinely scan your credit report to watch for signs of financial trouble. If just one of your accounts becomes delinquent, or if you suddenly revolve a balance at or near the maximum, this could induce your other lenders to raise their interest rates. Your interest payments could skyrocket.
Credit card companies want your business, and will spend $80 - $200 to acquire it. And its no wonder- in the US, we owe $785 billion in credit card debt, according to data analyzed by Cardweb.com. That's about $9000 of credit card debt per card-carrying household in the US. All that interest we're paying contributes to the lender's profits.
Note that $785 billion is just the amount of credit card debt; the actual figure for Americans' non-mortgage debt is $2 trillion.)
There are about 6,000 general purpose credit card companies in the US, mostly credit unions. That's a lot of options. Credit can be a great tool when used the right way.
So get your boutique-cards down to a minimum. They are not versatile, they can't help you in an emergency and they don't earn miles. Remember if you ever close an account to be sure the lender marks it 'closed by account holder.'
Keep a few general-purpose cards and leave it at that. And keep the balances low.
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