What is the purpose for that many cards?

[Anonymous]

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?

[takeshi74]

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%20c...

https://www.google.com/search?q=purpose+many+cards+site%3Aficoforums.myfico.com&oq=purpose+many+card...

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.

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@Anonymous wrote:

It just seems like a huge opportunity to mess yourself up.

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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.

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@Anonymous wrote:

What purpose does all that credit serve?

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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

[Anonymous]

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

[takeshi74]

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%.

[youdontkillmoney]

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.

[Erusidhion]

        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! 

[VirusCredit13]

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@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

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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. 

[Anonymous]

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@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%.

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+1 Well said!

[Anonymous]

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.

[lg8302ch]

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@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.

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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