How many credit cards is too many?

When it comes to using credit cards wisely, Canadians do a relatively good job. A 2011 survey by The Strategic Counsel found that 64 per cent of Canadians pay their balance in full and even if they don't, 93 per cent report that they always pay more than the minimum. We tend to carry around a lot less plastic than those in other countries, too: an average of two credit cards per household compared to U.S. consumers who average six. too-many

Still, the temptation is always there to sign up for the next card offering a low interest rate or other rewards. But should you? How many cards is too many?

Rhonda Sherwood, a wealth adviser for Scotia McLeod in Vancouver says it's not about the number of cards you own, but how you use them.

"If you can have three cards in your wallet and carry a low balance or pay them off completely each month, you're doing OK," she says. "But if a new one is going to get you in more debt with non essential purchases, then it is best to forgo one more card."

There's definitely an upside to having more than one card: you have access to more credit if you ever need it, rewards can save you a load of money on anything from groceries to travel, and they make it easier to track small business expenses versus personal ones. Owning more than one card can even improve your credit score faster - as long as you don't miss any payments.

But that's where many consumers get into trouble when using multiple cards.

A few years after Tim O'Connor graduated from university, his financial snapshot looked a lot like that of other recent grads: a big student loan, new car payments and four or five credit cards maxed to the limit.

"I just felt that I was in a vicious circle of paying things off and trying to keep up. The focus was constantly on money," says O'Connor, now a media relations manager from Wakefield, Que.

But that all changed after he came up with a plan that included paying off his debt and whittling his credit cards down. It worked. Today, O'Connor is virtually debt-free. He pays off his one credit card in full and recently used the travel points to fly to Prince Edward Island for a wedding.

While there's no magic number about how many should be in your wallet, if you are having a difficult time managing them and paying off several balances, it's time to scale back. Sherwood recommends keeping the cards that have the lowest interest rates and the lowest annual rates.

Have one you've owned for years and treated wisely? Hang on to that one, too. Who wants to pull the plug on a long credit history?

Ultimately, no matter how much plastic you choose to carry around, it's important to get into (or back into) the habit of prompt payment. That's O'Connor's secret now. Every time a credit card bill hits his mailbox, he pays it at work the next day using online banking.

"It's about being smart with your money," he says.

See related:  Expert advice: Simplify your finances; Tips for when it's OK to use your credit card

Published October 16, 2012

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