Most Americans have more than one credit card; some of them carry quite a few in their wallets. The reasons why consumers have multiple credit cards these days are related to the higher costs of living, low wages, the uncertainty of the job market, and aggressive marketing by the banks and companies that offer these credit cards.
Too Many Credit Cards?
When reviewing credit card statistics, the numbers are even more staggering than those of smartphones and tablets. There are far more credit cards than eligible consumers; according to data compiled by the United States Federal Reserve Bank, the average American carried 3.7 credit cards in 2014. When adding debit cards to these statistics, this average could climb as high as five cards per person.
The last time such a high number of credit cards was reported was right before the global financial crisis of 2008. Millions of Americans lost their jobs and home equity, which resulted in credit card defaults and bad credit scores. Eight years later, credit scores and histories have improved enough for consumers to start applying for credit cards again.
Credit Card Churning and Its Dangers
Some people carry multiple credit cards as part of a financial strategy to get lots of freebies known as incentives, which are mostly presented in the form of a signup bonus or a considerable amount of reward points that can be exchanged for free trips on the first class sections of major airlines, vacations and stays at luxurious hotels.
Applying for multiple credit cards for the purpose of racking up freebies is known as churning. People who have excellent credit scores will have no problem getting multiple credit cards and combining the rewards so that they can put together great vacations.
There are a few problems with credit card churning; the first one is directly related to credit scores dropping after each application. Although the scores will eventually improve, they may become a problem for people who intend to apply for mortgages down the line. There is also a risk of overspending, but the greater risks are related to identity theft and fraud.
Minimizing Damage from Lost and Stolen Credit Cards
People who carry multiple credit cards in their purses or wallets put themselves at a great risk. Reporting lost and stolen credit cards is never a pleasant task, particularly when the cards are tied to online bill payment accounts.
The first step in minimizing damage from multiple credit cards that are lost or stolen is to never keep them physically in the same place. One card should be kept safely at home in case of emergencies; preferably in a secure place such as a home safe or at least hidden away.
Another card can be used solely to make online payments, particularly those that are made automatically and in a recurring basis. By doing this, the process of reporting theft or loss is minimized. Cardholders who have balances across many accounts should consider consolidation for this same reason.
It is generally not a good idea to have more than two or three credit cards; however, a good strategy to manage multiple cards is to keep them in an electronic wallet such as PayPal, Google Pay or Apple Pay. These wallets have strong security features such as biometrics and remote tracking that can prevent fraudulent use of credit cards in case the mobile device is stolen.