Here’s a story that will make most Americans gasp: a man named Walter Cavanagh, called “Mr. Plastic Fantastic,” has 1,497 valid credit cards, a feat that has put him in the Guinness Book of World Records.
That’s a surprising number, especially since 33rd of american citizens own one or two credit cards, and twenty ninth own none at all, in line with a survey of more than 1,000 adults by polling firm gallup. but Cavanagh claims to have a “nearly good credit score,” and credit-card experts say he might be onto something.
“Having multiple credit cards in and of itself isn't a bad factor,” said Sean McQuay, a credit-card expert at NerdWallet, a personal finance website. “Many individuals have this idea that having a lot is incredibly risky, or signals some kind of financial distress. That’s simply not the case.”
Of course, owning more than 1,000 is extreme. McQuay recommended that an individual should carry roughly 2 to 3 cards on a daily basis — one for cashback, one for travel and dining rewards and another branded card for a merchant where you frequently shop. Limiting the options makes them easier to keep track of, and a few credit cards come with a price.
What’s more, NerdWallet found that rewards credit cards have an average annual fee of $58.
McQuay himself has fifteen credit cards to take advantage of their cashback and rewards, plus leftover cards from when he found himself in credit-card debt several years ago and transferred balances onto new cards.
Despite having numerous cards open, he says he has a credit score of 750, putting him in the “very good” FICO score range, above the average U.S. consumer’s score.
Still, she said, be wary of opening too many; it usually doesn’t pay off to apply for cards when a rewards bonus is available, if you finish up forgetting which ones you own, or wasting them. “You don’t need to get into a situation where you can’t keep track, or you’re overspending,” she said.
There are many ways opening multiple credit cards affects one’s credit score. Any time credit must be checked, such as taking up a new loan or opening a replacement card, the credit score takes a hit.
Applying for a new credit card lowers the credit score two to five points usually, Harzog said; which is why she doesn't suggest opening a new card if there's little reason to do so, especially right before applying for a mortgage or alternative important expense.
Plus, the average age of all the credit cards one owns can impact your credit score. Keeping older cards open — instead of closing them down when you get a new card — will allow you to keep up a longer history of credit and can improve your credit score, although the credit-card company might close one’s account because of inactivity.
On the other hand, increasing the number of credit at your disposal may help the credit score. If a client has a large amount of credit, “You’re sending a signal that you’re trusty,” McQuay said. In Cavanagh’s case, owning 1,497 credit cards amounted to a $1.7 million line of credit.
One trick: using a smaller percentage of your available credit — your “credit utilization ratio” — also helps your credit score. The optimum percent of debt isn't any over 100 percent, said Levin, “but that’s like telling someone they'll only eat one snack food.” A more realistic goal would be 20%; at 25th, carrying too much debt ends up negatively impacting one’s score.
NerdWallet explains that how much you use one card, called your “per-card utilization,” and your total use of credit across all cards, known as “overall utilization,” are equally necessary.
If you've got a $1,000 balance on a card with a $5,000 limit, your credit utilization would be 200th (a calculation of your “per-card utilization”).
“Overall utilization” is calculated by adding the number owed on each card and comparing to the credit limit. as an example, carrying a balance of $1,000 on a card with a $5,000 limit, plus an extra $3,000 on another card with a $5,000 limit, would put you at $4,000/$10,000, or 40%.
Experts recommend using several cards (although not as many as walter Cavanagh), if the consumer reliably pays them off and takes advantage of rewards, including cashback, fraud protection and price matching.
There are clearly significant risks to owning such a lot of cards. a lot of cards can cause higher spending and unpaid bills, said Adam Levin, the chairman and co-founder of Credit.com and the author of “Swiped.” (This couple in New richmond, Wis., had 11 credit cards and $89,000 in credit-card debt, and had to work several jobs to clear it.)
“When individuals look at credit cards,” Levin said, “you need to understand it’s either a wonderful enabler or a weapon of individual destruction.”
Source : marketwatch.com
That’s a surprising number, especially since 33rd of american citizens own one or two credit cards, and twenty ninth own none at all, in line with a survey of more than 1,000 adults by polling firm gallup. but Cavanagh claims to have a “nearly good credit score,” and credit-card experts say he might be onto something.
“Having multiple credit cards in and of itself isn't a bad factor,” said Sean McQuay, a credit-card expert at NerdWallet, a personal finance website. “Many individuals have this idea that having a lot is incredibly risky, or signals some kind of financial distress. That’s simply not the case.”
Of course, owning more than 1,000 is extreme. McQuay recommended that an individual should carry roughly 2 to 3 cards on a daily basis — one for cashback, one for travel and dining rewards and another branded card for a merchant where you frequently shop. Limiting the options makes them easier to keep track of, and a few credit cards come with a price.
What’s more, NerdWallet found that rewards credit cards have an average annual fee of $58.
McQuay himself has fifteen credit cards to take advantage of their cashback and rewards, plus leftover cards from when he found himself in credit-card debt several years ago and transferred balances onto new cards.
Despite having numerous cards open, he says he has a credit score of 750, putting him in the “very good” FICO score range, above the average U.S. consumer’s score.
There is no “magic number” of credit cards that's acceptable for an individual, said Beverly Harzog, a personal credit line expert and the author of “The Debt Escape plan.” “If you've got a good grip on your finances, and you use the credit cards responsibly, have as many as you need or want,” she said.
Still, she said, be wary of opening too many; it usually doesn’t pay off to apply for cards when a rewards bonus is available, if you finish up forgetting which ones you own, or wasting them. “You don’t need to get into a situation where you can’t keep track, or you’re overspending,” she said.
There are many ways opening multiple credit cards affects one’s credit score. Any time credit must be checked, such as taking up a new loan or opening a replacement card, the credit score takes a hit.
Applying for a new credit card lowers the credit score two to five points usually, Harzog said; which is why she doesn't suggest opening a new card if there's little reason to do so, especially right before applying for a mortgage or alternative important expense.
Plus, the average age of all the credit cards one owns can impact your credit score. Keeping older cards open — instead of closing them down when you get a new card — will allow you to keep up a longer history of credit and can improve your credit score, although the credit-card company might close one’s account because of inactivity.
On the other hand, increasing the number of credit at your disposal may help the credit score. If a client has a large amount of credit, “You’re sending a signal that you’re trusty,” McQuay said. In Cavanagh’s case, owning 1,497 credit cards amounted to a $1.7 million line of credit.
One trick: using a smaller percentage of your available credit — your “credit utilization ratio” — also helps your credit score. The optimum percent of debt isn't any over 100 percent, said Levin, “but that’s like telling someone they'll only eat one snack food.” A more realistic goal would be 20%; at 25th, carrying too much debt ends up negatively impacting one’s score.
NerdWallet explains that how much you use one card, called your “per-card utilization,” and your total use of credit across all cards, known as “overall utilization,” are equally necessary.
If you've got a $1,000 balance on a card with a $5,000 limit, your credit utilization would be 200th (a calculation of your “per-card utilization”).
“Overall utilization” is calculated by adding the number owed on each card and comparing to the credit limit. as an example, carrying a balance of $1,000 on a card with a $5,000 limit, plus an extra $3,000 on another card with a $5,000 limit, would put you at $4,000/$10,000, or 40%.
Experts recommend using several cards (although not as many as walter Cavanagh), if the consumer reliably pays them off and takes advantage of rewards, including cashback, fraud protection and price matching.
There are clearly significant risks to owning such a lot of cards. a lot of cards can cause higher spending and unpaid bills, said Adam Levin, the chairman and co-founder of Credit.com and the author of “Swiped.” (This couple in New richmond, Wis., had 11 credit cards and $89,000 in credit-card debt, and had to work several jobs to clear it.)
“When individuals look at credit cards,” Levin said, “you need to understand it’s either a wonderful enabler or a weapon of individual destruction.”
Source : marketwatch.com
