Why It Can Pay Off to Only Have One Credit Card

Income and Investments Woman shopping online with phone.

When I was younger, I had nearly a dozen credit cards.

I wanted to have an optimized credit card strategy that maximized cash back rewards, and I had one that gave 3% at restaurants, gas stations, and bookstores. I had one that gave me 1% when I shopped at Costco. I had one that I opened because it gave me a hundred dollars in gift cards. I had another that I opened in college and kept around because it had the longest history…

I didn’t carry every card every day, but my wallet held at least six at any one time. It was epic. And it was a headache. A HUGE headache.

That’s six credit cards I had to stay on top of each month. I had the bills set to autopay and I reviewed each statement – all best practices to ensure you aren’t a victim of fraud and that you pay on time, but it was a pain. I’ve since reduced the number of cards I carry to two; one of them doubles as my Costco membership card, and it’s been better!

Simpler Is Better

There’s something to be said for having a simpler financial situation. When I had six cards, that’s six accounts to log into and manage. I had to carry six cards in my wallet. If I lost my wallet, that’s six cards to cancel. It’s just too much.

Having so many financial accounts is much harder to manage and you may miss a payment if you don’t automate them. If you are self-employed it may be worth streamlining your credit card accounts as well. Although QuickBooks Self-Employed helps you easily track your business expenses year round, if you’re self-employed it may be easier to manage your tax deductible business expenses with a few credit card accounts instead of having multiple accounts to keep track of.

Multiple Credit Card Offers May Not Be Worth It

I thought I was optimizing for cash back but I was really just maximizing my stress. Your basic cashback credit card will give you 1% on every purchase. The higher cashback cards may give you 2% in some limited categories.

If you spend $2,000 a month and only ever use the 1% cashback card, you get $20 back. Let’s say the $2,000 was all in special higher cashback categories, the difference in cashback is only $20. You have to carry all these cards and you only got $20 for your trouble – and that makes big assumptions about how much you spend and where.

Those 2% cashback categories sound great on paper but you probably don’t spend enough (nor should you!) for it to be worth the extra time and headache.

Maxing Out Multiple Credit Cards Can Decrease Your Credit Score

Although being granted credit can increase your credit score, maxing out multiple credit cards you have can lower your credit score since it increases your credit card debt and what is called your credit utilization. There are cases where people with multiple credit cards not only keep them for the attractive cashback offers, but they are also enticed to use all of them them and max them out when they don’t actually have the money they are spending.

Don’t Close Your Accounts

When I simplified my finances, I closed almost every single online savings account. I didn’t do the same with my credit cards. Your credit score relies on a variety of factors, but one important factor is negatively affected when you close a credit card account. Credit utilization is a measure of how much open credit you are currently using. The lower the utilization, the better its impact on your credit score. When you close a credit card account, you lower your total available credit and your utilization goes up. Closing a lot of cards at any one time can significantly increase your credit utilization score.

If you have multiple cards from the same issuer, you can ask to “combine” credit limits so that the utilization score isn’t affected. Not all issuers do this, but it doesn’t hurt to ask.

Keeping your financial life simpler can be a big boom to both your bank account and your sanity. Not everything that can be optimized should be!

To help you learn the ins and outs of the impact of credit cards to your credit, Intuit has created a free financial health app called Turbo that brings together your verified IRS-filed income, credit score and debt-to-income ratio: the three key numbers that matter most to your financial health, so you know where you truly stand financially.

With Turbo, for each of the three numbers, you get the “whys” behind it, key takeaways, and comparisons to people like you. Turbo also gives you customized advice and insights so you can begin to better understand your financial picture. Whether you are looking to save money, secure a loan, pay for college or buy a house, Turbo gives you the tools you need to make financial decisions with confidence.

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