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Two credit cards?
Question: I use only a single credit card. Another card that I paid off has sent me a new card to renew this account. I have only a small savings account and not a lot in investments. Should I renew this card even though it will carry a zero balance just to have the credit available - just in case...? Jeanette, Shawanese, PA
Answer: I basically believe that most people don't need more than one credit card for their personal finances. However, if you are self-employed or have some kind of side business you also should have a business card. But for personal use one is enough. So, I don't see any reason to keep it now that you have gone through all the hard work of paying it off.
Now, not everyone in the financial advice business agrees with me on this approach. A good number might recommend keeping it open since closing the account might nick your credit score. Still, my own sense is that sensible money management is developing good financial habits and carrying an extra credit card around isn't worth it.
Instead, I'd focus on building up your savings account. By the way, I know that sentence on savings is much easier to write than it's to actually accomplish. But it's the right focus to take.
I have 3 credit cards, here's why:
- one for 'house' purchases, i.e. anything that we share the cost of (food, appliances, furnishings, etc.)
- one for my own personal purchases
- one for an emergency.
Now I use to have just the first two but for the home account we switched to a provider that offered more useful perks. Rather than close the old card, we've kept it. After a few years we got a notice from that card company they were going to close the account because of inactivity, so I made the next household charge on it, but otherwise it is not used.
So why the spare? Well it doesn't cost anything and could be useful in the unlikely event one of the other cards doesn't work, or to make an on-line purchase from a site you're not 100% sure of. On the other hand, there is the hassle of yet another credit card company to be notified and dealt with, should I lose my wallet.
Now if that extra card starts charging non-usage fees (which may happen) I'll drop it in a shot. But I've always paid all my cards off in full and on time every month, so it's not much of a potential liability. But Mr. Farrell's advice makes sense if you've had trouble with credit cards in the past.
I have a 2nd credit card that I hardly ever use, just like described. I'd recommend keeping it, if only for instances where your main card doesn't get accepted for some reason.
It's only happened maybe once or twice in my lifetime, but I've had my card denied for some reason or another, and having the 2nd card has saved me. Once was on a trip in Hawaii where my main card was put on hold because the company thought it might have been stolen.
Once in a while (like a year), I might put something on the 2nd card, but I rarely use it.
I have made a decision to keep two personal credit cards open. I pay off credit cards every month, have never carried a balance, and have excellent credit. Nevertheless, I have sometimes had the experience of having my card rejected or a freeze put on it for no apparent reason. In these situations, rather than getting on the phone with the credit card issuer while an irritated line piles up behind me at the checkout, I much prefer to have another card I can use.
