What Is a Credit Card?
A credit card refers to a card that enables the holder to borrow money so long as the amount does not supersede a line of credit, also known as the credit limit. This card is best for basic transactions, which reflects on your bill; your bank pays the seller, and later on, you shall pay the bank.
Even as you use credit cards, you will incur charges on interest on your purchases. You can avoid interests by not carrying balances from previous months. Credit cards come with high rates of interest, other than that, payment history, credit card balance are some of the factors that can impact on your credit score.
Average Number of Credit Cards
Americans in the last year registered a 60% increase in the number of average credit cards making the figure jump from 2.5 in 2019 to 4 in 2020. These figures indicate the increase in the need to borrow by the citizens in 2020.
The average balance on the credit card has also recorded a considerable increase from $4,293 to $6,194, which translates to a 44% increment.
About 61% of consumers have at least a credit card, which is a 1.6% rise if you compare it with the same period the year before. The surge has had a ripple effect across seeing a similar impact on the average credit card limit move up from $20,265 to $22,751, indicating a 12.2%.
Average Number of Credit Cards by State
Looking at the average per state with the 2017 figures as a reference, the average number of credit cards per head falls in the range of 2.57 to 3.49 as the average balance range found between $5,155 and $8,315. In New Jersey, for example, it stands at (3.49), Rhode Island (3.26), and New York (3.34) have the highest average number of credit cards. The people of Mississippi have an average of (2.57), Alabama (2.69), and Iowa (2.67) recorded the lowest average as far as the numbers of credit cards are concerned.
The data of the states with the lowest averages, such as Iowa and Mississippi, show they do not mostly depend on them in financing their needs.
Average Number of Credit Cards by Age
Looking at these averages using age groups, it’s apparent that they are rising as the user’s age and start dropping with the more advanced ages. The “Baby Boomers,” a name referring to the citizen at the age of 51-70, owns the highest average number of credit cards at about 3.5.
Americans at the age of 21 and below have approximately 1.4, which is even inferior to the country’s average. A vast number of younger citizens struggle to qualify and acquire credit cards; this explains why they score that low on the number of credit cards per head in that particular age group.
Average Credit Card Balance by Age
Borrowers who fall in the age bracket of 50 to 70 possess the highest average number of credit cards (3.5) and further record the highest average balance on the credit card ($7,750). This demographic isn’t a surprise as it comprises of the “Baby Boomers.”
The majority of them entered the workforce at a time where the job security was rocket high, this boosted by high rates of economic growth enabled these borrowers to make a killing of significant asset-base — which qualified them to more debt service.
On the contrary, borrowers at the ages of 18 to 21 own the least average number of credit cards (1.4) as well as the lowest average credit card balance ($2,047). High student loan debts and having no proper credit history contribute to such small figures. Borrowers at this age find it quite hard to qualify for a credit card.
What Number of Credit Cards Should I Have?
Well, the number of credit cards you can own depends on several aspects. However, there’s no specific number of credit cards to hold; it’s an individual decision that only you can decide.
All you need to know is that there are pros and cons to having several credit cards. We have put down some key points that should guide your decision on whether or not you need an extra credit card.
Some of the pros of credit cards are that they allow the owners access to credit, convenience, security, and protection, as well as the chance to build an excellent credit history.
Advantages of Many Credit Cards: One of the significant benefits of owning several credit cards is that it enables the owner to do a transfer of balance from a single card or multiple cards to one which has a lower rate of interest. Having numerous credit cards also play to your advantage, especially at the time where you might have lost or misplaced, or your account is frozen because of suspicious activities. In case you are on a mission to establish a strong credit history, signing up for a new credit card can be a decent move towards achieving that. Opening several credit cards enables you to take advantage of different rewards that usually come with various credit cards.
Shortcomings of Several Credit Cards: As much as creating multiple credit cards can contribute towards building a strong credit history, it has a short term effect that reduces the average age of your account. Age of an account is an essential factor in the calculation of credit score—whereby older ones are more appealing to the card issuers. Multiple accounts also attract several annual fees if all the cards charge such fees.