topic Re: What is the purpose for that many cards? in General Credit Topics

What is the purpose for that many cards?

Anonymous — Tue, 24 Mar 2015 11:57:37 GMT

I just started out but I really don't get it. What is the point of 15+ credit cards? It just seems like a huge opportunity to mess yourself up. What purpose does all that credit serve?

Re: What is the purpose for that many cards?

takeshi74 — Tue, 24 Mar 2015 12:13:15 GMT

This is a VERY common topic. Please refer to the countless "number of cards" and similar threads:

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&es_th=1&ie=UTF-8#q=number%20of%20cards%20site%3Aficoforums.myfico.com&es_th=1

https://www.google.com/search?q=purpose+many+cards+site%3Aficoforums.myfico.com&oq=purpose+many+cards+site%3Aficoforums.myfico.com&aqs=chrome..69i57.448j0j7&sourceid=chrome&es_sm=93&ie=UTF-8

tl;dr - It's not the number that matters. As always, one should select cards based on how they suit the individual. For some that may lead to a larger number of cards. For others it may lead to a smaller number of cards.

For me it's all rewards and benefits. A couple of cards were for BT offers. A couple are for padding revolving utilization.

@Anonymous wrote:
It just seems like a huge opportunity to mess yourself up.

One can mess one's self up with even just one card. If one can't budget and stick to the budget then one needs to work on that. If one can't responsibly manage credit then one needs to work on that as well. Having credit and "messing one's self up" are not mutually inclusive.

@Anonymous wrote:
What purpose does all that credit serve?

Try reading up on revolving utilization (falls under Amounts Owed below) and how it is a significant risk and scoring factor.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Re: What is the purpose for that many cards?

Anonymous — Tue, 24 Mar 2015 12:07:47 GMT

I've read that article a few times. I still don't understand how 100k of available credit is necessary. But as you said, to each his own. I will search through the threads to check out more feedback on it. Thx

Re: What is the purpose for that many cards?

takeshi74 — Tue, 24 Mar 2015 12:29:36 GMT

Sorry for the tone of first post. The FICO Scoring page is really just a start. Follow the links and use other resources (such as existing threads on topics) to complement.

Some things not mentioned on that page are that while the general recommendation is to keep revolving utilization under 30%, ideal utilization is much lower -- typically 10% or less.

Given how revolving utilization is assessed I don't recommend looking at limits as how much you need to spend. If you need to spend X then you want limits of at least 3X and ideally at least 10X. With revolving utilization lower is generally better as long as you're not at zero.

That said, one can manage reported utilization by paying balances down just prior to reporting. I personally prefer not hassling with it and have limits and spend that place me at about 11%.

Re: What is the purpose for that many cards?

youdontkillmoney — Tue, 24 Mar 2015 13:53:51 GMT

I use it as a backup, for those who are older/more experienced you will gone through up's and down's in the economy; take the most recent 2008 downturn and subsequent "Great Recession"...banks started to cut credit lines left and right and cancelling cards, especially if you have debt on other cards, they saw it in your credit report and deemed you too risky, even though you have a perfect record with them and zero balance...they cannot take the chance as you might become unemployed too with the recession....they cut your card line and/or card off completely.

This happened to me, zero history of lates and missed payments, perfect record......Chase cancelled my credit card out of the blue.

Luckily I had several more back up credit cards.

Options are worth money, that's why in stocks etc and other other real estate contract, an option to do something, to buy first etc is worth money.

Credit cards, having options, has value. So the option to have back up cards has values in an economic downturn.

Re: What is the purpose for that many cards?

Erusidhion — Wed, 25 Mar 2015 03:31:03 GMT

I have like 12 cards myself. I don't know how someone with 30+ cards can keep track of all the spending on it to keep it active, due dates; etc. I guess I'll find out eventually as I don't ever plan on stopping from doing app sprees ever 6-12 months. Having all the credit available can be beneficial in a lot of ways. Say you have $5,000 saved up in your emergency fund. Rent/Food/Children take precedence above everything else in life at least for me. Now say you have a vehicle whose engine just took a dump. You do cost analysis and you can put a new engine in it for about $6,500 including labor. Are you willing to use your entire emergency fund to do such a thing?

I think it would be irresponsible for someone to do that. So what do you do? Oh look; your credit history is impeccable and you can now apply for a high credit limit card with 0% APR to put the new engine in. OR hey look, you have a 12.9% APR card (assuming you don't want to try for a 0% APR card) to put the engine on and pay down over 6 months depending on income. You can always apply for a 0% APR Balance Transfer as well.

I have credit cards purely for emergencies and situations where I may not want to deplete my emergency funds, stocks; anything really that can be considered a liquid asset. I can just get a 0% apr card with the limit I need or put it on a low APR card; pay the interest or apply for a balance transfer card.

Obviously there's more situations in which a credit card may be beneficial. Your roof starts leaking and it's a major repair. Your AC unit goes out and it's 100 degrees out. Your transmission in your vehicle goes out. If you use your cards responsibly and in certain real life situations; you'll be fine whether you pay a little interest or not. Never deplete your emergency fund for a vehicle repair or home repairs if you have a credit card to cover it or can get one.

It's late so sorry if my post was a little long. I just wanted to give everyone a different perspective on things. There's certain priorities that are right for me and these are it. My situation and ideals might not fit yours. Good post and there were a lot of good replies to it though!

Re: What is the purpose for that many cards?

VirusCredit13 — Wed, 25 Mar 2015 16:35:15 GMT

@Anonymous wrote:
I've read that article a few times. I still don't understand how 100k of available credit is necessary. But as you said, to each his own. I will search through the threads to check out more feedback on it. Thx

No it is not nessecary. but if someone has 10k in debt, 10k in credit is all you need, but your credit is going to be maxed out, where is if you have 100k in credit, your only at 10% utilization, for same amount of debt.

Re: What is the purpose for that many cards?

Anonymous — Wed, 25 Mar 2015 17:31:13 GMT

@takeshi74 wrote:
Sorry for the tone of first post. The FICO Scoring page is really just a start. Follow the links and use other resources (such as existing threads on topics) to complement.

Some things not mentioned on that page are that while the general recommendation is to keep revolving utilization under 30%, ideal utilization is much lower -- typically 10% or less.

Given how revolving utilization is assessed I don't recommend looking at limits as how much you need to spend. If you need to spend X then you want limits of at least 3X and ideally at least 10X. With revolving utilization lower is generally better as long as you're not at zero.

That said, one can manage reported utilization by paying balances down just prior to reporting. I personally prefer not hassling with it and have limits and spend that place me at about 11%.

+1 Well said!

Re: What is the purpose for that many cards?

Anonymous — Fri, 27 Mar 2015 09:56:51 GMT

That makes sense. I guess I'm not at that point where I need that much credit. I just started to build my score 6 months ago with my first card. So now having a limit of $5000 over 2 cards is sufficient for me. I do realize that other people have way more bills than I do. And to be honest, I usually pay for everything with my bank card.

Re: What is the purpose for that many cards?

lg8302ch — Fri, 27 Mar 2015 10:08:29 GMT

@Anonymous wrote:
That makes sense. I guess I'm not at that point where I need that much credit. I just started to build my score 6 months ago with my first card. So now having a limit of $5000 over 2 cards is sufficient for me. I do realize that other people have way more bills than I do. And to be honest, I usually pay for everything with my bank card.

Welcome and it is a very good plan to add cards slowly and build credit lines up slowly. Like this you can also get used to manage the accounts. You are correct nobody needs 100K+ in CLs with half the income but when you can spend and pay your bills and do not have to worry about utilization it makes it easier. On the other hand it could also easier get out of control and the high CLs need a lot of self discipline. So start slowly and build slowly. Nice cards you got there to start with

Re: What is the purpose for that many cards?

pipeguy — Fri, 27 Mar 2015 17:35:40 GMT

@Anonymous wrote:
I've read that article a few times. I still don't understand how 100k of available credit is necessary. But as you said, to each his own. I will search through the threads to check out more feedback on it. Thx

Here's an example, I'm currently dealing with an estate as the administrator (executor), welp there are a lot of expenses having to do with an estate - especially one that is cash poor and asset rich which is my situation. I have a card with a $20k limit which does not report to the CRA's, currrently I'm using the better part of that credit line for estate purposes which will be paid back by the estate later this summer, but for now "available credit" is a big help because I don't have to go apply for a bridge loan for the estate which would probably be in my name and ding my credit scores as a new account and for inquiries. I can also max out this account (per se) in the short term without dinging my other scores because I have the option to use existing open accounts, especially one that does not report.

Now you might say, how many times will I need to deal with an estate - hopefully not many, but major car repairs when you break down in jackass flats or a broken arm while traveling in Europe or anywhere overseas, or your water heater blows out ..... any number of reasons. Lots of cards and lots of "reserve credit" is just that, when you need it you don't have to go hat in hand to "Joe's Payday Loans" to take care of matters - it's NOT for showing up drunk at Bestbuy and picking up a 84 inch 4D new TV because it seemed like a good idea at the time.

Re: What is the purpose for that many cards?

happypill — Fri, 27 Mar 2015 17:06:26 GMT

There are a lot of reasons:

1. As others have mentioned higher overall limit to reduce utilization%

2. Growth/buffer for AAoA - if you have 1 account and you add one, you just cut your AAoA in half; if you have 20 accounts you only cut it by 5%.

3. Diversity of lenders - lenders sometimes do unexplainable things. They cut limits, close accounts, put fraud alerts on your cards, etc. Some of it is warranted, but sometimes its nice just to be able to walk away from a lender, and you can do that if you have lots of other accounts.

4. Points, sign-on rewards, annual bonuses - I think most people don't put more than 2-4 accounts into regular usage, but many people like to accumulate points and sign-on bonuses are a great way to do that. There are also certain cards (most common with hotel cards I believe), where the annual reward exceeds the annual fee. If you can get $500 worth of free hotel stays for a $50 annual fee, it makes sense to keep that card, and any others like it.

Re: What is the purpose for that many cards?

onstar — Fri, 27 Mar 2015 18:08:09 GMT

But you (OP) do have a point.

While all these reasons that people are providing in this thread can be valid, they are often not the reasons why some people get "that many cards" in their wallet. For many, this has become a game. It's about want, not need. I am definitely guilty of this too. It's financial immaturity. America has a spending problem.

NOTE: Some of you might not like this post because YOU don't play the credit card game or YOU are really responsible. Then clearly, this post is not about you. This is directed more at the people who don't have a handle on their finances (which is roughtly 1/2 of all U.S. households).

Re: What is the purpose for that many cards?

Anonymous — Fri, 27 Mar 2015 23:56:41 GMT

@onstar wrote:
But you (OP) do have a point.

While all these reasons that people are providing in this thread can be valid, they are often not the reasons why some people get "that many cards" in their wallet. For many, this has become a game. It's about want, not need. I am definitely guilty of this too. It's financial immaturity. America has a spending problem.

NOTE: Some of you might not like this post because YOU don't play the credit card game or YOU are really responsible. Then clearly, this post is not about you. This is directed more at the people who don't have a handle on their finances (which is roughtly 1/2 of all U.S. households).

Why on Earth do you think having a lot of cards and financial maturity are mutually exclusive? Simply having the cards isn't a problem, it's what you do with them, same as any other tool.

You're right in that personally I do see it as a game, I did a 10 card app spree at the beginning of February because I was bored and it was fun. I had more than enough in my CLs to get into trouble before the spree and obviously after it too. I also pay my bills off every month and haven't had to pay interest on a card for the last two years.

If my wife ever thought for a second that I would be running them up I would hear about it, long and loud. I got the arched eyebrow several times as it was. CPAs can be like that.....

Re: What is the purpose for that many cards?

PinkPanther3719 — Sat, 28 Mar 2015 20:25:09 GMT

@onstar wrote:
But you (OP) do have a point.

While all these reasons that people are providing in this thread can be valid, they are often not the reasons why some people get "that many cards" in their wallet. For many, this has become a game. It's about want, not need. I am definitely guilty of this too. It's financial immaturity. America has a spending problem.

NOTE: Some of you might not like this post because YOU don't play the credit card game or YOU are really responsible. Then clearly, this post is not about you. This is directed more at the people who don't have a handle on their finances (which is roughtly 1/2 of all U.S. households).

I completely agree. I did credit applications a couple of weeks ago just to see which cards I could get. Yes, there were some I truly wanted, but some I apped for just because I knew I could probably get it. Currently only 6 of my accounts have a balance. One is because I'm using it frequently because I want a higher credit limit and I just established a relationship with the company. Two I am using for balance transfers as one is 15mon 0% apr and the other is 12 mon 0%apr. I have a Care Credit account as I had a cat that got very sick and passed after surgery. Two have very small balances just so they won't get closed (will be paid when they post).

I'm putting the money I'm saving from the 0% apr in a savings until the last month of the promotion and just paying it all off. I'm making more than the minimum, but don't want to pay it off when I can save some. What's I'm planning on doing is writing out all my cards and their benefits and using the one that gives me the best benefits as my regular card.

For a while, I always used my debit card as I didn't want to get in trouble with my credit. Then I realized, I might as well use the card and pay it back immediately. That way, I'm getting benefits (generally cash back) and it's as if it still came out my account.

Re: What is the purpose for that many cards?

dollar_bill — Sat, 28 Mar 2015 20:49:37 GMT

If you are responsible there is a lot of upside to having a good number of cards. I'm not sure I agree with the financial immaturity comment I read from someone else, rather it's the opposite. To maintain a higher count profile takes an extremely mature individual. It's easy to get credit and burn folks, it's much harder to get credit and grow your file as the years tick away. That takes a responsible, mature person.

It was mentioned in a bunch of other posts, but there is a huge upside with sign-up bonuses, reward points, AAoA, etc... The utilization part is really helpful if you ever find yourself in a temporary cash shortage. It's happened to me before and it could happen again.