Wednesday, April 10, 2013

Why I Only Have 1 Credit Card

Owning your own credit card is one of those milestones in any young person's life.  It creates a sense of pride in an individual.  To think that a bank would trust me enough to temporarily loan money is often one of the first experiences one has with lending.  If not managed properly, these little pieces of plastic can be quite problematic, however, if managed properly, they can provide a whole slew of benefits.  With all the credit card options on the market, and seemingly every store offering their own version, it would be enough to make anyone confused.  In this article, I talk a little bit about why I have chosen to stick with 1 credit card instead of many.

Managing Your Credit Score:
People often wonder what goes into their credit score.  Well, the newly created Consumer Financial Protection Bureau (CFPB) has a nice concise explanation.  Generally, how much credit you have, how active you are in using it, how many accounts you have recently opened, and whether you pay off those accounts are the main factors.  If I were to open many card accounts, I'd probably take a ding on my credit score.  That said, it is a little more difficult to increase your credit line with just one card which would improve your overall score.

Low Maintenance:
Keeping inventory of your many credit cards can be quite a hassle, especially if you are trying to maximize benefits.  Do I get 5% cash back at supermarkets on this card, or is it 10,000 points at gas stations if I spend $2,000 in the first 3 months on that card?  All this can get very confusing if you're not a financial pro.  The added benefits to me are simply not worth the hassle and work involved with keeping up with all these accounts.  It would seem very easy to accidentally miss a payment, and now much of the benefits you reaped or taken away in the form of late fees and increased interest.  It is just much easier to pay off your card each month through using 1 card.

Keeping Track of Spending Habits:
With multiple cards, it is much harder to keep track of your spending habits, unless you are religiously recording every transaction.  With just one card, you have all your credit spending in one place and can easily budget accordingly.  It becomes increasingly hard to know what you spent in a given month if you're looking at 3 or 4 different statements.

Potential Fees for Not Using:
Some cards have fees if not used for a certain amount of time.  Therefore, you have to keep balancing whether you used your card in 60 days or so.  This can get annoying after awhile.

There are some downsides to having only one card.  My Wife and I experienced this a little while ago when our card information was stolen and some fraudulent charges were paced on it.  It took us about a week to get a new card, which could have been a problem since we had no other credit cards.  Overall, though, I think the benefits outweigh the risks.

Wonderful Moment of the Day: Finally starting to get some Spring weather.

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