Ask Chuck: One or more credit cards?
My spouse thinks we need another credit card. We’re doing just fine with one. Who do you agree with?
Divided on credit cards
Dear Split Credit Cards,
It is not wise to intervene in the middle of a dispute without hearing both parties. My first reaction is therefore to recommend that you find an agreement with your spouse outside of a third party arbitrator like me. Since I recently went through a similar discussion with my wife, Ann, it will be easy to share our journey that might help you bond.
One card or several cards?
It has been my position and my practice for years to have only one credit card. There are plenty of benefits to this practice: earning bonus miles, less vulnerability to debt, and easier account tracking, to name a few.
Someone recently stole our credit card number. We received an alert and initially thought it was a scam. Back home, we checked our account online. Sure enough, someone was having fun shopping at Nordstrom in a whole different part of the country.
My stance on having one card has officially changed! If you are a responsible spender, pay your bill in full each month, or maintain a very low balance, you should consider a second credit card – not many credit cards, just two! The average American has four cards; some have many more. India’s Manish Dhameja holds a Guinness World Record for 1638 cards in 2021.
A backup card is important in case a card is lost or, like me, your account number is stolen. Until my replacement card is received, I am forced to use cash or a debit card. I don’t like this option, especially when traveling. So before you read on, be sure to see my qualifiers above. If – only if – you meet these conditions, having two cards has multiple advantages.
Access different networks
Visa, Mastercard, Discover and American Express are the four payment networks. Visa and Mastercard are widely accepted, Discover is accepted in the US but not internationally, and American Express has the lowest acceptance in the world. It is advisable to take cards of different networks with you.
Combine cards to earn higher rewards on your spending. Analyze the rewards offered by the cards to maximize your returns. Maps vary. Some offer travel rewards, cash back or zero interest.
Your spending habits will influence your decision. We like to earn travel miles on our cards.
Reduce credit utilization rate
The amount of credit you use has an impact on your credit score. Lenders like to see that you are not maximizing your available credit. Another card can lower your ratio (balance to credit limit) by spreading your purchases across multiple cards. This increases your credit score unless unruly spending is a problem.
You can save money by transferring the balance from a high interest card to a low rate card. Just be sure to read the fine print to avoid penalties and fees.
Two cards can prevent a big expense from hurting your credit score. It can also help if you hit a limit on a map in times of distress. Just make sure you can afford to pay them back, otherwise the penalties will far outweigh the rewards/benefits.
The negatives of two or more cards
- Annual fees
- easy to spend
- More to organize
- Credit check when opening a new card
Manage your cards
Monitor your balances and review alerts. Save your number in a safe place with a contact number/website in case it is lost or stolen. Design a system that notifies you when payments are due.
Credit card companies make money by charging high interest rates and late fees. Avoid getting trapped in an endless cycle of debt by carrying balances. Don’t try to open multiple cards in a short period of time, as this could hurt your credit score.
Lenders like to see a long credit history, so think before you close an old card. Inactive cards can be closed, which can also damage your credit score. Check your credit report regularly. Find errors and fix them quickly. You can request a free copy from the 3 rating agencies.
Pay on time and don’t overspend. Let these verses guide you:
“The rich rules over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7 ESV)
“Pay to all their due: tax to whom tax is due, revenue to whom revenue is due, respect to whom respect is due, honor to whom honor is due. (Romans 13:7 ESV)
Here is my revised position! Ann and I agree to open another credit card account. I hope this is helpful to you and your spouse as you seek to unify your preferences.
If credit card debt is a source of pain for you or someone you know, Christian Credit Counselors is a trusted source of help toward financial freedom.
Chuck Bentley is CEO of Crown Financial Ministries, a global Christian ministry founded by the late Larry Burkett. He is the host of a daily radio show, My MoneyLife, which airs on over 1,000 Christian music and talk stations in the United States, and the author of his most recent book, Economic Evidence for God?. Be sure to follow Crown on Facebook.