60 Second Savings: Counting Credit Cards

How many credit cards do you need?
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In a society where everyone has enough cash at all times, credit cards would seem unnecessary. Unfortunately, however, many of us need to spend now and pay later.

But do yourself a favor and don't go overboard. The number of credit cards you own can damage your credit score, which in turn affects your ability to lock in low interest rates or even qualify for a mortgage or car loan.

In general, financial experts recommend having no more than two or three credit cards in your wallet. This way, you limit your exposure to debt.

"Plus, each time you open a credit-card account, the card company issues a credit inquiry, which can slash 10% off your credit score," according to Greg McBride of bankrate.com.

A good rule of thumb: Have one card with a low annual percentage rate (APR) for big-ticket purchases, like furniture or electronics, and another card for day-to-day expenditures that you pay in full each month.

But no matter how many cards you possess -- be it one or 10 -- the most important habit to get into is keeping your debt-to-available-credit ratio as low as possible.

"If you have four or five cards, even if you don't necessarily use the credit cards ... your percentage will come way down," says Adam Levin, CEO of credit.com.

And, he continues, many score experts say anything above a 35% credit utilization results in a lowering of your credit score, anywhere from a few points to well over 100 points.

It's important to be aware -- if your credit score is lower than 700 (that's out of 850), you may want to think about giving it a boost.