Credit cards can be complex.
Rates, terms and fees may differ from card to card. Some help you score airline miles; others help you build credit history. If you’re careful, they can improve your credit score. If you’re not careful, they can tank it.
Managing a credit card is a pretty big deal. Before you get your next one, here are three common credit card questions — with answers — that can help you make your best credit card decision.
Question 1: When is getting a credit card a bad idea?
If used responsibly, credit cards can be beneficial tools for building credit and making big purchases in a pinch. That doesn’t mean everyone should own one.
If you’re already repaying a bundle of debt (such as a massive amount of student loans), adding a credit card to your mix of monthly bills is probably not a great idea.
Also not a good idea: jumping on every single credit card offer you get in the mail.
If you already have a credit card you’re managing well (i.e. making payments on time and keeping your utilization low), you may notice an uptick in the number of unsolicited and pre-approved credit card offers landing in your mailbox.
Credit card companies usually ply you with cards offering rewards and benefits once they realize you’re a responsible credit card user. Flattering, right? Well, keep in mind that taking on too many credit cards with varying interest rates can trap you in a debt cycle that’s hard to escape.
The bottom line: If you don’t need another credit card, don’t get one.
Question 2: What happens if I get a credit card, but don’t use it?
Deciding not to use your credit card usually won’t impact your credit score. You are, however, rewarded if you do use your credit card frequently and responsibly.
There are exceptions.
Some credit card issuers may cancel your card if it’s inactive, which could create a blemish on your credit report. And some credit card companies may stop reporting your account activity to the credit bureaus, which could also hurt your score.
Question 3: How many credit cards is too many?
There’s no magic number for how many credit cards you can own at one time. It all depends on your financial and credit situation. If you can handle two major credit cards, great. If you manage a third with no annual fee but tons of rewards, even better.
You shouldn’t take out multiple credit cards if you have a history of keeping high balances you never pay off in full. You also should keep the number low if your debt substantially outweighs your income.
Word to the wise: the credit bureaus love it when you have a mix of debt on your credit report. Taking out a mortgage while repaying your student loans, car loan and a credit card looks much better than just having four credit cards.
For more answers to common credit questions, check out our credit series at LendingTree Academy, a free video resource you get with your LendingTree account!