- 1 How Many Types of Credit Cards Should I or Can I Have?
- 2 How Many Credit Cards Should Singaporeans Really Own?
- 3 How Many Credit Cards Should I have? What is Normal?
How Many Types of Credit Cards Should I or Can I Have?
Whether you’re new to credit or are currently juggling several credit card balances, you may be wondering if you’re getting the most out of your credit cards. There are many types of credit cards available, each with their own benefits. But how many credit cards should you have, and what types of credit cards might work best for you?
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There is no limit on how many credit cards you can have. 1 If you’re new to credit, it might be tempting to take advantage of all of that credit that is now available to you. But taking on too much credit card debt could set you back financially as balances rise and bills could start to pile up.
What are some examples of different types of credit cards?
New and different types of credit cards hit the market every year. However, just because there are many options to choose from doesn’t mean every offer is right for you. 2 Here are a few common types of credit cards and some information on why they may or may not be right for you:
- Balance transfer cards allow users to transfer a balance from high interest rate cards to a card with a lower interest rate for an introductory period. This is a good option if you’re having trouble catching up on a balance because of quickly mounting interest.
- Low interest credit cards might also offer a low or zero introductory APR (Annual Percentage Rate) that gives users the freedom to make a big purchase without accruing interest during the introductory period. It’s also a good option for someone with little or no credit card experience as it allows you to get used to the process of paying your balance every month. Be sure to read the terms and conditions because your interest rate will increase after the introductory term is over.
- Cash back credit cards offer cash rewards for simply using the card to make purchases. Most cash back cards earn a flat percentage cash back on all purchases while some may offer a higher percentage for specific purchases such as gas or groceries. This is a good option if you’re using your card for everyday purchases and are able make all your payments on time.
- Hotel and airline credit cards offer users rewards for staying at certain hotels or flying with specific airlines. As you earn more points, your stays and flights might be discounted, upgraded or even free of cost. This is a good option for someone who travels for business, but annual fees can make it a bad investment for those who don’t travel as much.
- Retail or store rewards credit cards offer users rewards for purchases at specific retailers. These rewards can be used to earn rewards or discounts from the retailer while everyday purchases may earn fewer rewards, if you are even able to use the card outside of the specific retailer. Interest rates are typically higher on these cards, and the rewards programs can be more limited. These cards are a good option for someone who is loyal to a specific brand or makes several purchases through one retailer.
Every situation is different, and there is no perfect number for how many credit cards to have. If you’re new to credit, starting with one low interest credit card could be your best option. If you can responsibly manage several cards, having more types of credit cards could allow you to take advantage of different types of rewards programs. You should research credit cards thoroughly and make an informed decision as to which card would benefit your lifestyle the most.
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How Many Credit Cards Should Singaporeans Really Own?
There is such a thing as having too many credit cards. But how do you know what’s too many?
When it comes to credit cards in Singapore, you can get too much of a good thing. All those discounts and deals are great, but you’re inviting trouble beyond a certain point.
Here’s how to tell if you too many credit cards.
As a general guideline, two credit cards are enough for most Singaporeans.
In most cases, the first credit card is a cashback card for general expenses like groceries and utilities. Cashback is the rebate you receive for using the card. This is typically 6 – 8% of what you charge to it.Note that there is often a limit to how much cashback you can earn, but some cards like the American Express True Cashback Card lets you earn unlimited cashback.
The reason we use this as the main card? It’s simple: a cashback rebate is versatile. It’s like getting a permanent discount on your most essential purchases. We’ve listed down all the ways you can maximise your cashback card, as well as the best credit cards for groceries in Singapore.
Your second credit card should be for the biggest portion of retail spend. If you spend most of your disposable income on restaurants, for example, there should be a dining credit card in your wallet. If you spend more on travel, then the second credit card could be for air miles.
In general, one card will be a Visa card while the other will be a MasterCard. If one is not accepted, the other will be. Comfort taxis, for example, accept MasterCard but not Visa.
Get more than 2 credit cards if you have other major essential expenses
It’s seldom necessary, but if you are good at tracking your finances, you can use three or four credit cards to optimise your purchases even further.
For example, some motorists have a third credit card that is specifically for petrol. Some of these cards can give you cashback in addition to existing discounts. Compare credit cards to find out which ones can save you money on your major everyday expenses.
Some people use four credit cards because they have more than one primary expense. For example, they may spend on entertainment (movies, pubs, etc.) as often as they spend on dining. This might lead them to have a separate card for each purpose.
Sometimes, frequent travellers to have a specific card enabled for overseas use. We don’t recommend this. Most cards, be they Visa or MasterCard, will charge 1% for currency exchange rates when you buy abroad. As such, we suggest using cash instead of credit cards when you are overseas.
Some travellers will deliberately cap the credit ceiling (the amount that can be borrowed) on one of their cards, and reserve it for overseas use. This limits the damage in the event of theft.
It’s difficult to track your payments when you have too many credit cards
Why Not Just Have as Many Credit Cards as Possible?
Each credit card has its own billing cycle, which is activated from the moment the card is used. You generally have 27 to 31 days to pay the card in full, before the interest rate is applied.
If you have two credit cards, you only have two billing cycles to remember. If you have a dozen credit cards, you are liable to get confused and miss a cycle. This leads to penalties such as late fees.
If you spread out your loans across 10 or more credit cards (again, we suggest you use credit cards only to pay for things, not for actual loans), it becomes easy to underestimate how much you owe. For example, owing S$300 on 10 different credit cards makes you feel like you owe less, as opposed to one card with a S$3,000 debt.
Alternatively, people with a large number of credit cards may end up using just one or two of them. The other credit cards are wasted. Note that these extra cards are not “free” – they often have an annual fee of between S$100 to S$300. So do not keep credit cards if you are not using them.
The final problem with having too many credit cards is that your credit score goes down. Your credit score is used to determine your risk level when you take out a loan, and you can obtain a report of it from the Credit Bureau of Singapore (CBS) for S$6. Keeping your credit score healthy is important for major loans, such as a home loan or education loan.
Use Credit Cards as a Mode of Payment, Not Mode of Credit
The interest rate on a credit card is a whopping 24% per annum. This makes it terrible for loans. On the other hand, a credit card gives you discounts, air miles, and rewards when you charge purchases to them.
No matter how many credit cards you own, they must be used as a mode of payment only. Your credit card shouldn’t be used as a way for you to borrow money you don’t have. Instead, treat your credit card as a way for you to earn points and discounts through your purchases.
This means you must pay your bill in full and on time. If you need to make a large purchase on your card, place it on a 0% interest instalment plan so you don’t risk incurring interest or late fees. Mastering a few money habits before getting a credit card can also help you avoid debt.
And if you don’t think you can trust yourself with a credit card, perhaps the number of cards you should own is zero.
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.
How Many Credit Cards Should I have? What is Normal?
There is no magic equation, resulting in how many credit cards that every person must have. Besides, your credit cards influence your credit score depending on how you utilize them. You’ll need to think of your financial requirements as well as behaviors to determine the number of credit cards you must need to have at your disposal.
Three to five credit cards is considered healthy for building good credit. A person should have more than one active credit trade account. More than one credit account demonstrates to creditors that you are capable of managing your money in multiple areas responsibly. People with established credit receive more favorable interest rates when they apply for loans.
Credit Utilization is a Reason People Get More Than One Credit Card
There are a few reasons you might choose to consider having more than one credit card. Having more than one credit can raise your credit score. The secret is to keep a careful watch on your credit utilization ratio. Utilizing means use your credit cards, but don’t use more than 30% of your combined credit lines. Ideally, you should be using less than 9%. Some people open more credit cards so they can have a higher combined credit limit.
You can see why 8% credit utilization will look more favorable to lenders but is it not the same thing? The amount of the debt is the same. Banks see it as one person has more control of their spending limits than another.
I would caution anyone to take this approach as a reason for acquiring more credit cards. This behavior can also lead to 30,000 dollars in credit card debt. Be sure if you are to implement this technique that it will not tempt you to overextend yourself and result in crippling credit card debt.
Make it a habit when possible of paying credit card statements in full each and every month. Paying in full rather than being a revolver will increase your credit score. It is a myth that you build higher scores by carrying balances from month to month. The truth is using your credit card regularly and paying the balance in full each month will increase your credit score. Not using your credit cards will not increase nor decrease your credit score.
Another reason to have more than one credit card is to have various types of reward credit cards in which to earn reward points. Earning credit card rewards can be a good strategy, but limit yourself to only a few.
A cash back credit card should be in everyone’s wallet. There is nothing more basic than a cash back credit card that you can use for anything. Discover card is very popular because they will offer during certain quarters an enhanced reward structure where you can earn higher reward values on certain goods and services.
Travelers should have a travel credit card but do your research. Many Travel credit cards have steep annual fees associated with them. If you do not use the card enough, you will not earn enough points to travel and be left with that annual fee to pay every year. Watch out for blackout days. Some airline credit cards limit your ability to travel. What good is a free plane ticket if you can only travel during off-peak travel times?
How many credit cards do you have?
Department Store Credit Cards – How many credit cards are too many?
There is one type of reward credit card I would like you to consider very carefully. That is the department store credit card. Often people get roped into applying because they are offered 20% off their purchase “just” for applying. The problem is you might only shop at that store once every three years. Some individuals have a wallet full of virtually useless credit cards. Department store credit cards and their rewards are only useful if you are a frequent shopper of that store.
With department store credit cards how many credit cards is too many? Some individuals have a wallet full of mostly useless credit cards. Department store credit cards and their rewards are only useful if you are a frequent shopper of that store. So one unused department store credit card, in my opinion, is too many.