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My Wallet, Credit Card Apps, and Loyalty Cards

A reader sent me the following email (with my reply):

I have just started reading your blog, and I think it has a lot of interesting points. I am going through the backlogging of entries and I wanted to know if you covered the topic of how many credit cards you have. If not, I’d like to know your take.

I don’t think I’ve talked about how many I have total (I don’t have an accurate count) but here’s an older “Whats in my wallet” [3] type post that might interest you.

I basically use my credit cards as ways to get cash back and build my credit. I currently have three and primarily use citibank professional because it seems to give the most back. I always pay the full balance every month online, so I never incur a late charge or interest. I suspect there are always going to be bigger and better promotions for new credit cards in the future, and I was wondering if it hurts to apply to many credit cards. The only thing I can think of is that it may hurt your credit. (Also, you might get confused with so many different credit cards and forget to pay one that you rarely use. I have an online alarm on mine that alerts me if even a penny is spent on mine so I can keep track of the ones on the backburner).

It hurts to apply to a lot in part because companies realize you have a lot of credit and wonder why you need so much. If you plan on buying anything big, that requires a loan, I’d recommend against apply for credit cards for bonuses [4] or for their lucrative limited time cash back bonuses. Ultimately the hit you take on your credit and the effect is has on whatever rate you’d get on a loan doesn’t make it a sensible decision. On a technical note, it’s the number of hard inquiries, the frequency of those inquiries in the last 30/60 days, and the average age of a line of credit that is negative against you. Some positives, if you get credit, is that you have a lower debt to total credit ratio (since you’ll have more credit). Ultimately, those bonuses and cash back just don’t match up against a higher loan rate.

Also, what about those store credit cards that offer you better rewards when you use them in their stores?

As for store credit cards, I don’t have loyalty to any one store so I don’t use any loyalty cards [5] (some programs, yes, but credit cards, no). If you really want that 10% a purchase, I’d apply to a card with a gift card after purchase because you usually get more out of those.