Credit card maximizers make carrying multiple cards their hobby, using this one for groceries and that one for travel, juggling due dates and rewards categories. But most people prefer to spend their time on other things.
If the idea of chasing credit card rewards as a pastime doesn’t appeal to you, using just one credit card is a reasonable choice. Here are the benefits of carrying only one card, and how to choose it wisely.
THE MINIMALIST APPROACH
There are several good reasons to simplify.
—When you’re shopping: People who carry multiple credit cards have a decision to make every time they reach for their wallet. If you’re carrying only one card, that decision is a lot simpler.
—When you’re paying the bill: Paying bills takes time. Even if a credit card issuer offers automatic payments, it still takes time to set it up, time to make sure you have enough money in your account and time to check in to make sure things are running smoothly. Doing that for just one credit card account instead of several sounds downright restful.
—When you’re trying to manage spending: “If you’re somebody who’s really out of control when you have credit cards, then having many credit cards is almost like an alcoholic in bar,” said Tracy Becker, president of North Shore Advisory in Elmsford, New York, which provides credit-building and monitoring services to individuals and businesses. Using a single card helps some people monitor their spending more easily and avoid trouble, she said.
—When you’re worried about fraud: Thieves who gain access to credit card information often make small purchases at first to see whether a card gets shut down, Becker said. It’s easier to monitor fewer accounts for fraudulent charges, so using only one card makes it easier to catch fraud more quickly.
CHOOSING THE RIGHT CARD
Alas, there is no “best” credit card that is right for everyone. It depends on your spending habits, whether you habitually carry a balance and what kind of rewards you find most useful.
—If you carry a balance: Credit card debt is expensive, so if you don’t always pay things off in full every month, prioritize a low interest rate above every other card feature. When you carry a balance on a rewards card, the interest eats up much, if not all, of the value of your rewards.
—If you travel frequently: Travel credit cards offer good rewards only if you travel often enough to use those rewards. If you don’t, a cash back card is the better option. Still, the extra conveniences that come with some travel cards, like free checked bags, can make these cards worthwhile even to occasional travelers.
—If you spend a lot in one or two budget areas: Some rewards credit cards offer higher returns on things like groceries, gas or restaurants. Look for a card that will reward the way you spend.
—If you just want to keep things simple: The simplest option is a card that pays the same amount — in cash, points or miles — on every purchase, with no limit on the rewards you can earn. These are sometimes called flat-rate credit cards.
—If you’re concerned about fees: An annual fee on a credit card can be worth it, as long as the rewards are high enough to outweigh the fee. Premium travel cards, in particular, have high fees but generous rewards. For a good no-fee card, your best bet is probably a cash back card.
PROTECTING YOUR CREDIT SCORE
Before you get excited and pare your credit cards down to just one, think about your credit score. Closing older accounts reduces the amount of credit you have available, and lowers the average age of your accounts. Both of those things can lower your score. Becker said having more credit cards also demonstrates to lenders that you can handle lots of credit.
“It is possible to have a very high credit score with only one card, but not as likely,” Becker said.
But that’s no reason to carry more cards than you want to. If your older accounts don’t charge annual fees, keep them open, but leave the cards at home. Becker recommends putting just one recurring bill, like a gym membership, on an older account and then setting up an automatic payment so you pay on time. If your unused cards charge annual fees, though, close them. Your credit score will recover.—AP