HOW MANY CREDIT CARDS IS TOO MANY ?

 

HOW DO YOU KNOW IF YOU HAVE TOO MANY CREDIT CARDS?

How many are too many? Is there a set rule or a prescribed limit? Apparently not from what I have read. But what I have found is that when I have to spend hours almost daily to monitor them, it is too many for me.

many credit cards
How many Credit Cards Should You Carry? from moneyunder30.com
HOW DID I END UP WITH SO MANY CREDIT CARDS?

When I discovered that cash reward credit cards could be a reliable way to reduce my monthly expenses, I started applying for them as often as I could. Of course, the idea was to get the largest promotional welcome bonus, the highest % of cash rewards as well as a substantial amount of available credit. Therefore for about the last three years, gathering cash reward credit cards has become a major pastime. Well, guess what? Now I have too many cards.

credit cards
From creditcard.com, One Credit Card or Many? How to Decide?
THE JOURNEY TO TOO MUCH

It has been a tremendously educational experience collecting all the cards I have. Primarily, it has helped and still helps to reduce my expenses. In addition, I have written many blog posts and several Ebooks about this. Doubtless, there will be more. But the most significant comment I can make at this time is that right now I have too many. As I mentioned in a previous blog post, I have reached critical mass.

FICO score factors
There are Six Primary Credit Card factors in the major FICO® scoring system as illustrated by Credit Karma®

For most of this time, my primary concern has been focusing on the 5 or 6 FICO® credit score factors that go into building a good credit score. Certain cards have taken priority for charging purchases. Then it recently occurred to me that if I did not start using all of my cards, some could be closed for inactivity. That could affect my credit score negatively by lowering my available credit, changing the average length of time I have had cards and flagging too many closures. Low and behold, that is exactly what happened this week. One of my co-branded cards was closed without notice for inactivity.

Account-Closed
Credit Monitoring Alert from CreditSesame.com
HOW MANY CARDS DO I NEED?

I need enough cards to satisfy the FICO® score factors. Fortunately, I found a formula that I could use to determine how many cards to own, which ones to keep and those to phase out since I had surpassed critical mass. These are the factors I now consider in which cards to use:
a. the oldest aged accounts
b. those with the best credit line and lowest credit utilization ratio
c. the ones with optimal returns in my top spending categories
d. those that give me the maximum value for use with my favorite merchants, stores, airlines or hotels

straight flush credit card collection
Optimize the Credit Cards You Carry with A ‘ Straight Flush’
HOW MANY CARDS DO I WANT?

My sense is that I would like to have no more than ten at the most. For example, my ‘straight flush’ analogy illustrates most of them. Beyond that, I think that one or two travel cards are essential. Other than that, an additional card or two in the ‘straight flush’ formula would be OK too.

FICO® score 9/24/19
My FICO® score in September 2019 according to CreditJourney
CONCLUSION

I am at a new beginning. I have climbed the credit card mountain in excellent standing. Now it is time to descend the other side with equal care. Therefore future writings on this topic will involve reducing my load doing my best to maintain my great credit card standing while keeping also 6 FICO® score factors in balance.

SOURCES & RESOURCES

How Many Credit Cards Is Too Many?
How Many Credit Cards Should I Have?
Images of Many credit Cards

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CREDIT CARD CRITICAL MASS

 

credit card critical mass
From Credit Karma, How Many Credit Cards Does the Average American Have?

WHAT IS CREDIT CARD CRITICAL MASS?

Credit card critical mass refers to the appropriate number and kinds of credit cards to have. How does one know what kinds to have? How many to have? When enough is enough? Then, when is how many too much, therefore, when is it time to stop collecting more or even cut back? What is the best way to cut back? This blog post will attempt to answer these questions. But keep in mind that the numbers and types of cards will vary depending upon the person, their lifestyle and needs.
 

COLLECTING CREDIT CARDS

When I started collected credit cards, I went through some very active phases. The reason for these was manifold:
a. building up my credit
b. getting promotional welcome bonuses
c. collecting cash rewards
d. establishing the best cash rewards rates
e. traveling bonuses

 

Straight flush
A straight flush similarity to an ideal collection of cash reward cards. Image from Dreamline.

THE CASH REWARDS SWEET SPOT

At one point in my credit card collecting, I realized that I had achieved a cash rewards credit card sweet spot. I compare this to a straight flush in the card game of poker. The blog post, A Two-Pronged Credit Card Rating System (Part 2 – June 2019) goes into detail about this. The straight cash rewards flush looks like this collection of credit cards:
6% for US supermarkets
5% for purchases at many cobranded store cards
4% for dining out
3% for gas
2% for health care services and items
1.5% for all purchases

 

REACHING CRITICAL MASS

In the collecting cards phase, I saw only the small picture. At the time I applied for a card, I found it a necessity. After a few years, I accomplished all of my above goals and then some. Not only did I reach my credit card critical mass but in retrospect, I surpassed it. How did I know that I had done this? That was easy to answer. I knew because the number of cards I had to deal with had become unmanageable.

Credit Card critical mass
Store Credit Cards image from rewardscreditcards.org

 

SURPASSING CRITICAL MASS

As the owner of many credit cards, I was forced to see the big picture and began to ask myself these questions:
a. how many cards did I really need?
b. what categories did I spend the most in?
c. with that in mind, which cards did I use most often?
d. which cards was I leaving dormant?
e. why was I having trouble keeping track of my card purchases when it came time to do my monthly accounting?
f. how could I make things more manageable?
g. when was enough, enough?
h. how could I safely cut back on the number of cards I had?

 

THE CREDIT CARD CRITICAL MASS FORMULA

Fortunately I found a formula I could use to determine about how many cards to own, which ones to keep and those to phase out since I had surpassed critical mass. These are the factors I now consider in which cards to use:
a. the oldest aged accounts
b. those with the best credit line and lowest credit utilization ratio
c. the ones with optimal returns in my top spending categories
d. those that give me the maximum value for use with my favorite merchants, stores, airlines. or hotels

credit-card-critical-mass
Credit Card Cash Reward Categories are similar to traffic signals, go, caution, turn at your own risk. This image is from Pixabay.

 

PHASE OUT RATHER THAN CLOSE CARDS

It is best not to close cards. Instead, let them phase out by letting them be dormant. Make sure that any card that has fees stays open only if it is useful by the above standards. Otherwise, close it to avoid any future fees if it is going to be dormant.
 

IN CONCLUSION

It is beneficial to have both network and co-branded cards when they have value. But it is wisest not to gather more cards than are really necessary. It can become a real nuisance to have too many cards to care for. On the other hand, it is great to have just enough to be helpful and profitable.

 

SOURCES & RESOURCES

1. Is 20 Cards Too Many To Own: How to Streamline Your Wallet
2. How Many Cards Is Too Many?
3. How to Cancel A Credit Card
4. How Many Credit Cards Should I Have?
5. How Many Credit Cards Does the Average American Have?
6. Network and Co-Branded Cards

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