One of the most important things you can do with your credit cards is to maintain a good balance between how much credit you have available and how much credit you are using. Many think that there is a “magic number” of credit cards that represents too many. That is not the case for everyone. According to the Federal Reserve Board, the average American has 4.6 credit cards. For some, four credit cards is acceptable. Yet for those who regularly burn through most of the credit they have, even one credit card is too many.
Instead of looking at the number of credit cards you have, look at your overall available credit and how much of that you are using. The best credit card, of course, is one that does not carry a balance. However, for many that is not possible. Whether you have recently done a balance transfer to a 0 APR credit card or all your cards are long established, it is important to consider how much of your credit lines you are using.
Many experts agree that it is best to keep your balance to half of your available credit. Therefore, if you have four credit cards and a total of $10,000 available for use, you should limit your credit balances to a total of $4,000. Another thing to consider is the quality of the credit cards you have. First tier issuers offer better terms (including 0 APR balance transfer credit cards), and they look better on your credit report. Department store credit cards and cards issued by obscure banks do not look as good.
The bottom line is that you must do what is best for you. Try to get a combination of quality cards that allow you high enough limits that you can keep your balance to half of what is available to you. This will help you cultivate a better credit score, as well as help keep you from being overwhelmed by debt.
