Credit Cards 101
Know what you're getting into when you swipe that little piece of plastic.
Ideal Number and Types of CardsQ. I’m tempted to open a lot of store cards around the holidays to take advantage of discounts. Will that affect my credit score?
A. Yes: Every new application results in a credit-report inquiry. Each inquiry typically causes your score to drop by up to five points. And the lower your score, the less attractive you become to lenders when you apply for credit, a loan, or a mortgage. (Your score will rebound if your bill-paying record is good and you don’t apply for more cards.) Be choosy about opening new cards. Consider how much the holiday discount will save and whether you’ll be able to pay the bill in full. Store cards typically charge higher interest rates (sometimes more than 20 percent), so carrying a balance can eat up any initial savings.
Q. How many credit cards are too many? And is there such a thing as too few?
A. Many experts recommend having no more than three or four cards. “When people have too many, they tend not to keep track,” says Howard Dvorkin, the founder of Consolidated Credit Counseling Services and the author of Credit Hell: How to Dig Out of Debt (Wiley, $20, amazon.com). Having too many cards can also make you look credit-hungry, which could hurt you if you apply for credit you really need.
Since no card is accepted universally, you’ll want one or two of the major cards, plus a charge-only card (the balance must always be paid in full) and a store card if you shop somewhere regularly.