topic Re: How many cards, and how high? in Credit Cards

How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 16:34:58 GMT

Hi,

I'm just getting back into the credit card game, since finishing grad school. I applied, and to my surprise, was instantly approved for a Capital One Venture Rewards card with a limit of $20,000! It is my only card. In another thread I asked if this limit wasn't too high, and if I should have it lowered. The answer I received was that I should not have the limit lowered and that I should have a second card.

So, here is my question, what is the rationale for having 2 cards, and is there any risk in having really high credit limits (other than the temptation to go buck wild and carge up the world)? Like, should I reserve some available credit, in case I want to buy something else on credit? I can't imagine what, but, who knows? Or, is it risky to have so much credit available in case I lose the card and someone else finds it?

What is the FICO wisdom on responsible credit card ownership, other than the obvious (keep the balance below 10%)? If there is another thread that details it all, feel free to point me to it.

Re: How many cards, and how high?

smallfry — Sat, 25 Dec 2010 16:52:41 GMT

I think 3 credit cards would be best. Rotate usage each month and you should be fine. Less than 3 cards might be considered a thin file.

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 16:56:04 GMT

It's a little confusing, isn't it? Seems to fly in the face of the wisdom to only apply for credit if you need it. The gaming of the system is much more intricate than that. I have student loans and a car loan, so I have a ton of credit history. I thought I read somewhere that having fewer open lines of credit was better. Maybe even somewhere in my FICO report. Not so?

Re: How many cards, and how high?

MarineVietVet — Sat, 25 Dec 2010 17:09:05 GMT

@Anonymous wrote:
Hi,

I'm just getting back into the credit card game, since finishing grad school. I applied, and to my surprise, was instantly approved for a Capital One Venture Rewards card with a limit of $20,000! It is my only card. In another thread I asked if this limit wasn't too high, and if I should have it lowered. The answer I received was that I should not have the limit lowered and that I should have a second card.

So, here is my question, what is the rationale for having 2 cards, and is there any risk in having really high credit limits (other than the temptation to go buck wild and carge up the world)? Like, should I reserve some available credit, in case I want to buy something else on credit? I can't imagine what, but, who knows? Or, is it risky to have so much credit available in case I lose the card and someone else finds it?

What is the FICO wisdom on responsible credit card ownership, other than the obvious (keep the balance below 10%)? If there is another thread that details it all, feel free to point me to it.

Hello and welcome.

I don't go along with the notion that having more than one card is absolutely essential. There are peope who have high scores with just one CC. But I can see several reasons to have at least a second card.

1. Accounts do keep closed for no apparent reason and with no forewarning and you want to have another one just in case.

2. You might be somewhere and try to use a card and for whatever reason it is denied. Not only can that be embarrasing but you might end up stranded in a worse case. Having a second card as a backup can relieve the fear of "what if".

There isn't a downside to having high credit limits as long as you are responsible with usage. You are correct that it can be a temptation for some to use all the CL but that's where self discipline kicks in.

You'll get different opinions and suggestions about the best way to use your card and/or cards. You'll have to figure out what works best for you. There is one approach that works for many people but it's something that really doesn't have to be adhered to closely unless you just want a hobby or you are trying to tweak your score upwards in anticipation of applying for new credit in the near future.

Have only one of your cards report a small (<9% of credit limit) balance on it's monthly statement and then PIF (Pay in Full) before the due date to avoid any finance charges. On any other cards you might have always have them report a zero balance on their statements. That doesn't mean you can't use them but time your payments so that the desired zero balance is achieved several days before the statements post.

That's just one strategy and you'll probably get others. As I said you'll need to figure out the best tactic for your situation.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 17:38:16 GMT

Thanks, I think I'll stick with just one, actually. Since it's already, essentially, my backup in case of some emergency, but mostly a way to rack up milage points, rent cars and secure hotel reservations, I don't really feel the need for an extra backup. Maybe someday I'll see the reason for it. I plan to use it regularly, and try to set up a way to pay it off right away, rather than waiting for the bill to come. We'll see what the options are when it arrives and I set up the web thingy.

Thanks, again.

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 17:57:22 GMT

Personally. I would rather have one card with high limits than 10 low limit ones. The whole point is to have a decent amount of credit reporting on your CR in my humble opinion. You seem to have a car loan, student loan and one good card with a remarkable starting limit. Just guard it with your life, the less cards you have to juggle the better I say

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 19:42:10 GMT

Well, then it's settled. Capital One Venture Rewards FOR LIFE!

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 20:32:57 GMT

You may change your mind when your installment loans close.

Re: How many cards, and how high?

smallfry — Sat, 25 Dec 2010 20:50:31 GMT

@Anonymous wrote:
Well, then it's settled. Capital One Venture Rewards FOR LIFE!

Kidding right? You're gonna place all your eggs in a Cap One basket? 1 CC for sure is ill advised. With 3 you can use 1 each month let it report and rotate and never lose points for too many accounts reporting balances. 1 is a bad idea.

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 21:01:33 GMT

marinevietvet wrote
Hello and welcome.

I don't go along with the notion that having more than one card is absolutely essential. There are peope who have high scores with just one CC. But I can see several reasons to have at least a second card.

1. Accounts do keep closed for no apparent reason and with no forewarning and you want to have another one just in case.

2. You might be somewhere and try to use a card and for whatever reason it is denied. Not only can that be embarrasing but you might end up stranded in a worse case. Having a second card as a backup can relieve the fear of "what if".

There isn't a downside to having high credit limits as long as you are responsible with usage. You are correct that it can be a temptation for some to use all the CL but that's where self discipline kicks in.

You'll get different opinions and suggestions about the best way to use your card and/or cards. You'll have to figure out what works best for you. There is one approach that works for many people but it's something that really doesn't have to be adhered to closely unless you just want a hobby or you are trying to tweak your score upwards in anticipation of applying for new credit in the near future.

Have only one of your cards report a small (<9% of credit limit) balance on it's monthly statement and then PIF (Pay in Full) before the due date to avoid any finance charges. On any other cards you might have always have them report a zero balance on their statements. That doesn't mean you can't use them but time your payments so that the desired zero balance is achieved several days before the statements post.

That's just one strategy and you'll probably get others. As I said you'll need to figure out the best tactic for your situation.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Merry X'mas to everyine!

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 21:04:20 GMT

Heh. When I'm in my 50's I'll get another one, then.

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 21:09:48 GMT

I don't really understand this logic, but I'm new to FICO thinking. What is the difference between having one card that reports a balance, and having 3 cards, one of which reports a balance? And if I never run up more than 10%, does it really matter all that much?

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 21:34:53 GMT

@Anonymous wrote:
I don't really understand this logic, but I'm new to FICO thinking. What is the difference between having one card that reports a balance, and having 3 cards, one of which reports a balance? And if I never run up more than 10%, does it really matter all that much?

It will change your total util.

For example: you have balance of $2000 on one of your cc. Additional cc's CL is 5k each.

with one CC total CL of 20k your util is 10%

with two ccs total CL of 25k your util is 8%

with three ccs total CL of 30k your util is 6.67%

If you get higher CL on additional ccs, your util will go lower than shows in above.

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 21:37:30 GMT

It isn't a major difference IMO if you use it responsibly. What would make it matter to me is if Cap One decides to CRD or close the account for whatever reason. Then only having 1 card available may become an issue. Your installment loans will eventually be paid and closed. They will still report for up to 10 years and possibly longer.

So lets just use an example;

Your installment loans are now paid and closed. They still report but no activity on installment loans which is part of your credit mix. Possible impact on scores.

With-in a year or so of your installment loans being paid and closed, Cap One decides for some odd reason or possibly you ran into financial trouble to close your account. Now since you decided to depend on the one CC you will have no revolving and no installment loans open and that would IMO have a major negative impact on your scores.

We can agree to disagree on whether you will continue to pay on time and never be late or run into financial problems in your future. Myself on the other hand takes my experience and says I do not know what tomorrow will bring.

I have a lucrative business and while I never thought I would run into a financial problem I did. It was nothing of my fault except to lay all my eggs in one basket with my bank which closed and was not bought over. Yes the bank was insured and I did recoup some of my own money back but my losses were 4x the amount. Lesson learned for myself.

While my credit took a dive and my business took a loss in revenue I was lucky enough to have vendors and employees and a positive DW who worked with me through it all. I was thankful for all their help and once back up to full speed I returned the favor with additional business for my vendors and substantial pay increases and bonuses to my employees.

Sometimes we all run into problems beyond our control and sometimes we cause them ourselves. Either way we are stuck with dealing with them. After my past experience I would never put all my eggs in one basket again. Take it from me I was cocky and on top of the world and had the attitude it could not happen to me. Boy was I wrong!

Re: How many cards, and how high?

MarineVietVet — Sat, 25 Dec 2010 21:48:32 GMT

@Anonymous wrote:
I don't really understand this logic, but I'm new to FICO thinking. What is the difference between having one card that reports a balance, and having 3 cards, one of which reports a balance? And if I never run up more than 10%, does it really matter all that much?

No it doesn't really matter all that much IMO unless you are trying to boost your score by a few points. One of the things scoring looks at is how many CC's are reporting a balance (also how many total balances of all kinds there are) each month so if you do have more than 1 card and all of them show a balance it might cost you a few points but as long as you keep your utilization on this card below 9% each month you'll be fine. Some people seem to do best at 1-3%. You'll need to find your sweet spot.

If you stick around and continue to participate in the forums I think you'll start to see why it's recommended to have more than one card but it's certainly not required by any means.

Re: How many cards, and how high?

Anonymous — Sat, 25 Dec 2010 21:53:33 GMT

@Anonymous wrote:
It isn't a major difference IMO if you use it responsibly. What would make it matter to me is if Cap One decides to CRD or close the account for whatever reason. Then only having 1 card available may become an issue. Your installment loans will eventually be paid and closed. They will still report for up to 10 years and possibly longer.

So lets just use an example;

Your installment loans are now paid and closed. They still report but no activity on installment loans which is part of your credit mix. Possible impact on scores.

With-in a year or so of your installment loans being paid and closed, Cap One decides for some odd reason or possibly you ran into financial trouble to close your account. Now since you decided to depend on the one CC you will have no revolving and no installment loans open and that would IMO have a major negative impact on your scores.

We can agree to disagree on whether you will continue to pay on time and never be late or run into financial problems in your future. Myself on the other hand takes my experience and says I do not know what tomorrow will bring.

I have a lucrative business and while I never thought I would run into a financial problem I did. It was nothing of my fault except to lay all my eggs in one basket with my bank which closed and was not bought over. Yes the bank was insured and I did recoup some of my own money back but my losses were 4x the amount. Lesson learned for myself. Yes, we all learn from the mistakes!

While my credit took a dive and my business took a loss in revenue I was lucky enough to have vendors and employees and a positive DW who worked with me through it all. I was thankful for all their help and once back up to full speed I returned the favor with additional business for my vendors and substantial pay increases and bonuses to my employees. Oh, you are such a good business owner!

Sometimes we all run into problems beyond our control and sometimes we cause them ourselves. Either way we are stuck with dealing with them. After my past experience I would never put all my eggs in one basket again. Take it from me I was cocky and on top of the world and had the attitude it could not happen to me. Boy was I wrong!

Great example and advice! Well done JM-AM

Re: How many cards, and how high?

OnTheRebound — Sat, 25 Dec 2010 21:57:34 GMT

Excellent post JM-AM

I had a very similar experience back in 2001-2002. Never, ever again will I think it can't happen to me. That was a very sobering and humbling experience.Things can change very quickly. You know the saying... shxx happens.

@Anonymous wrote:
It isn't a major difference IMO if you use it responsibly. What would make it matter to me is if Cap One decides to CRD or close the account for whatever reason. Then only having 1 card available may become an issue. Your installment loans will eventually be paid and closed. They will still report for up to 10 years and possibly longer.

So lets just use an example;

Your installment loans are now paid and closed. They still report but no activity on installment loans which is part of your credit mix. Possible impact on scores.

With-in a year or so of your installment loans being paid and closed, Cap One decides for some odd reason or possibly you ran into financial trouble to close your account. Now since you decided to depend on the one CC you will have no revolving and no installment loans open and that would IMO have a major negative impact on your scores.

We can agree to disagree on whether you will continue to pay on time and never be late or run into financial problems in your future. Myself on the other hand takes my experience and says I do not know what tomorrow will bring.

I have a lucrative business and while I never thought I would run into a financial problem I did. It was nothing of my fault except to lay all my eggs in one basket with my bank which closed and was not bought over. Yes the bank was insured and I did recoup some of my own money back but my losses were 4x the amount. Lesson learned for myself.

While my credit took a dive and my business took a loss in revenue I was lucky enough to have vendors and employees and a positive DW who worked with me through it all. I was thankful for all their help and once back up to full speed I returned the favor with additional business for my vendors and substantial pay increases and bonuses to my employees.

Sometimes we all run into problems beyond our control and sometimes we cause them ourselves. Either way we are stuck with dealing with them. After my past experience I would never put all my eggs in one basket again. Take it from me I was cocky and on top of the world and had the attitude it could not happen to me. Boy was I wrong!

Re: How many cards, and how high?

AndySoCal — Sat, 25 Dec 2010 22:49:15 GMT

I have 3 credit cards that I use regularly. Which card I use depends on when the closing statement date is. For example if it is the 5th of the month I will mostly likely use the card the has a statement closing date on the 4th. This allows me to stagger the amount of each bill so they due not come due all at once. Secondly I have been in the situation where a credit card lender decided to no longer off the type of card I had (cash rewards). The lender also did not offer me a different type of card that they offered at that time. Ever since that incident I have multiple credit cards.

Re: How many cards, and how high?

Anonymous — Sun, 26 Dec 2010 01:11:31 GMT

@Anonymous wrote:
It isn't a major difference IMO if you use it responsibly. What would make it matter to me is if Cap One decides to CRD or close the account for whatever reason. Then only having 1 card available may become an issue. Your installment loans will eventually be paid and closed. They will still report for up to 10 years and possibly longer.

So lets just use an example;

Your installment loans are now paid and closed. They still report but no activity on installment loans which is part of your credit mix. Possible impact on scores.

With-in a year or so of your installment loans being paid and closed, Cap One decides for some odd reason or possibly you ran into financial trouble to close your account. Now since you decided to depend on the one CC you will have no revolving and no installment loans open and that would IMO have a major negative impact on your scores.

We can agree to disagree on whether you will continue to pay on time and never be late or run into financial problems in your future. Myself on the other hand takes my experience and says I do not know what tomorrow will bring.

I have a lucrative business and while I never thought I would run into a financial problem I did. It was nothing of my fault except to lay all my eggs in one basket with my bank which closed and was not bought over. Yes the bank was insured and I did recoup some of my own money back but my losses were 4x the amount. Lesson learned for myself.

While my credit took a dive and my business took a loss in revenue I was lucky enough to have vendors and employees and a positive DW who worked with me through it all. I was thankful for all their help and once back up to full speed I returned the favor with additional business for my vendors and substantial pay increases and bonuses to my employees.

Sometimes we all run into problems beyond our control and sometimes we cause them ourselves. Either way we are stuck with dealing with them. After my past experience I would never put all my eggs in one basket again. Take it from me I was cocky and on top of the world and had the attitude it could not happen to me. Boy was I wrong!

Okay. It's an interersting story, but isn't it more about not having all of your deposits in one place, since they're only insured to $250,000? Or am I misunderstanding something, here?

I'm not trying to be arrogant, so please bear with me while I explore the ideas. I don't have anyone depending on me, like employees. I think, when it comes to business there is a lot more risk and the rules are totally different, no?

I haven't used revolving credit in about 5 years, so it's difficult for me to understand how I could possibly need so much credit when I am used to paying for everything in cash. I've done everything, international travel, renting cars, securing hotel rooms, in the past without a credit card. It's a bit more inconvenient, but it can be done.

Of course I know that things can happen, people get sick and/or injured, people get divorced, banks collapse, criminey, things have happened to me, and I've done plainly stupid things, and I've ended up in a bit of trouble, but I've lived for many years on less money per year than that credit line. I don't even want to think about "needing" it, at all, let alone needing more than that much money on a credit card. Also, I should mention, my husband is Dutch, and he does not see the need for even one credit card, since we have these handy debit cards, which work like credit cards, and we're not even looking to get a mortgage, so I'm forced to look at it through his perspective, which is taking a rather hard line against credit in general.

I really appreciate everyone's thoughts on the matter, and I'm sure I will learn a lot if I hang around here. I find it a very interesting subject, in general, apart from my minor dilemma.

Thanks very much, and happy holidays.

Re: How many cards, and how high?

Anonymous — Sun, 26 Dec 2010 02:19:40 GMT

OP ... Have you read marinevietvet's respond to your post?

We only can do is to provide the information to assist other members here in forum. Remember, it is up to you to decide what are you going to do ... mot us.