Almost three in ten Americans believe credit cards are ‘dangerous,’ one study suggests. But should we really be so frightened of a little debt?
Financial advisors and credit experts insist everybody should have at least one card to ensure they build a good credit score – so long as they are responsible.
‘I would say two cards is optimum and three would be maximum to keep finances simple,’ certified financial planner Cathy Curtis, from Oakland, California, told CNBC.
Two is beneficial because if an individual relies on one, they risk not being able to use it in some stores.
Bruce McClary, senior vice president at the National Foundation for Credit Counselling, told CNBC: ‘In those cases, it might make sense to have two different card types: Visa and Mastercard, for example.’
Financial advisors and credit experts say two credit cards is the optimum amount to own while three is maximum
Ted Rossman, senior industry analyst for Bankrate.com, recommends spreading out credit applications out over two or six month periods.
He added that business owners may also wish to separate their personal and work expenses by using two cards.
According to the Consumer Federation of America, managing your credit responsibly helps households qualify for lower interest rates and fees allowing them to amass greater savings.
But users must understand how to use them responsibly by keeping their balances small and regularly paying them off.
As a general rule of thumb, experts recommend using no more than 30 percent of your total balance allowance and pay it off in full every month when their statement is due. So, somebody with an available limit of $10,000 should avoid going more than $3,000 in the red.
But if somebody desperately needs the money, having two cards can help users spread their credit utilization and keep the two balances low.
However, McClary cautioned having too many cards makes individuals look like ‘compulsive borrowers’ to lenders – even if their balances are in-check.
Ted Rossman, senior industry analyst for Bankrate.com, recommends spreading applications out over two or six-month periods.
Data from the New York Federal Reserve shows credit card balances in the US ballooned by 4.7 percent to $1.08 trillion in the third quarter of the year
Outspoken personal finance expert Dave Ramsey is against the use of plastic altogether and regularly recommends his followers to cut theirs up
He adds that first-time cardholders should try to find a card without annual fees and with zero interest.
Bankrate, along with NerdWallet and CreditCards.com, offer comparison services to help customers find the best deals.
The guidance comes amidst concerns of America’s swelling credit card debt driven by high inflation.
Data from the New York Federal Reserve shows credit card balances in the US ballooned by 4.7 percent to $1.08 trillion in the third quarter of the year.
The issue is compounded by the fact the Fed hiked interest rates to a 22-year high of between 5.25 and 5.5 percent in 2023. In turn, this has pushed up the average credit card interest rate to 20.74 percent.
It is little wonder then that the subject of credit can prove controversial.
Outspoken personal finance expert Dave Ramsey is against the use of plastic altogether and regularly recommends his followers to cut theirs up.
And a recent study by NerdWallet found 26 percent of Americans viewed credit cards as ‘dangerous’ – though 51 percent said they were ‘helpful.’
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