What is the number of credit cards you need? Experts claim it isn’t 0...

How a credit card can be useful?

According to Ted Rossman, senior industry analyst at CreditCards.com, having a credit card — and using it wisely — is an excellent approach to start developing great credit.

Based on a report from the Consumer Federation of America, establishing strong credit is "essential" for qualifying for loans such as a mortgage or vehicle loan, as well as for other things like buying a mobile phone, renting a car, or finding a job. Consumers with good credit might also qualify for cheaper interest rates.

Rossman advises first-time cardholders to acquire a card with no annual fees and no interest for the first year, and to pay their debt in full and on time each month. It is critical to ensure that the interest rate will remain reasonably low once the original no-interest offer has expired.

According to experts, there are advantages to only using one card.

Keeping track of only one set of due dates and other crucial facts, such as card perks, is one example. Limiting ourselves to one credit card simplifies the debt management procedure.

Perks of having more than one

However, having only one credit card also has disadvantages. For one thing, not all shops will accept your card brand.

Similarly, a customer who owns a business may segregate their personal and commercial costs by using two cards, according to Bruce McClary, senior vice president of the National Foundation for Credit Counselling.

According to experts, consumers might prioritise a good all-around card as their primary card. A card with no annual charge that offers 2% cash back on all transactions might be a solid "foundation" for consumers.

A second would most likely be based on how customers purchase and how different credit cards distribute rewards and advantages, according to experts. For example, regular travellers may benefit from a credit card that focuses on travel rewards and has no international transaction fees.

How many is too many?

Even if users have modest balances, using too many cards might make them appear as desperate borrowers, lowering their credit score, according to McClary. Lenders receive the impression of a "compulsive borrower" if there are too many credit applications in a short period of time, he adds.

Spacing out applications — one or two every six months, and no more than five every two years — is normally safe, according to Rossman. This covers debt applications of all kinds.

Furthermore, if the credit cards include annual fees, having many credit cards may increase the cost of carrying credit.

It is essential for customers who are disorganised or who tend to spend too much and carry balances on their cards to restrict their cards, maybe to just one, instead of paying their amounts in full each month.

To finalise, customers should constantly endeavour to pay off balances each month, automate their monthly payments, and obtain a credit card with the lowest feasible interest rate.

(Sources: cnbc.com)