In general, the best credit cards to have are the ones with the lowest interest, lowest fees, and best benefits. You certainly want to carry a widely accepted major credit card like a Visa, MasterCard, or American Express, but beyond that, it becomes more subjective. The specific answer will obviously be different for each person, depending on credit history, preferences, and needs.
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For Visa and MasterCard, the level of interest rates, fees, and bonuses are set by the issuing bank, so you could have a MasterCard from one bank with substantially different terms than a MasterCard from a different bank. Also, the same bank may offer different types and levels of card with different terms.
An article in Forbes Magazine, gives examples of some of the better bonus cards available. The article mentions two cards in particular, the Chase BP Visa Rewards Card and the Citi Dividend Platinum Select Visa and being among the best cards available. Both cards offer cash back on purchases.
How many credit cards should I have?
You may wonder how many credit cards you should have. It is definitely a good idea to have more than one credit card, but you want to have few enough that you can manage and safeguard them appropriately. According to Investopedia, the average person who uses credit cards has between three and four of them. That may be a good number for a few different reasons.
Credit scores are calculated using a variety of factors, and one of those factors is debt utilization ratio. If you are able to spread your debt over several cards, you will use less of your limit and your ratio will be better, which in turn may get you better credit. Another factor to consider is that sometimes a card may expire or is frozen for security reasons without you knowing about it; in these circumstances, an extra card would be a big help.
Different credit cards offer different bonuses so, if you are trying to collect airline miles and you want cash back at the gas pump, you might want to carry the two different cards that provide those benefits. The downside is that the bonuses will accumulate slower if you spread your purchases between two cards.
There are dangers to having too many credit cards. You increase the chance of losing one or forgetting to pay a bill with each new card you add. Also, for some people, having the availability of too much credit greatly increases the chance that they will overspend and put themselves in financial trouble.
Should I carry a secured credit card?
A secured credit card is good for certain circumstances. If you want to build or rebuild credit by using a credit card then a secured credit card gives you all the benefits of a credit card, but you can usually obtain it with even a poor credit rating. Since a secured card is basically a credit card that lends you your own money that you put up to secure it, there is no risk for the banks and they are usually happy to issue them to just about anybody.
A credit card which you secure with your own cash is also good for limiting spending. If you have a child in college and you want them to have a credit card but don’t want them to get into debt, a secured card is what they need. Similarly, if you are shopping online or going on a trip and don’t want to risk someone stealing your card and having access to your full credit limit, the secured card could be the safest way to go.
If I don’t need a credit card anymore, should I cancel it?
You certainly don’t need to carry cards that you don’t need anymore, but you might be better off locking them in a safe deposit box than cancelling them, as long as there are no fees associated with keeping them active. You never know when you’re going to need a lot of money in a hurry. Having an extra open credit line or two might help you through a financial crisis. Again, for the sake of your credit rating, it is a good idea to keep cards active so that your debt utilization ratio stays low.
Just the act of closing your credit card accounts can sometimes be a red flag to the credit bureaus that can bring down your credit rating.
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