You Only Need One Credit Card
In today's world, credit cards are everywhere, and it seems like every financial expert has an opinion on which one you should have. There are cards with cashback rewards, travel points, and even store-specific discounts. But here's the truth: for most people, having just one credit card is all you really need. Why? Because developing good money habits is far more important than chasing after credit card rewards or obsessing over a perfect credit score. In this post, we’ll explain why sticking to one credit card can save you from financial headaches and help you build a solid foundation for your financial future.
More Credit Cards = More Spending
Research has shown that people tend to spend more when using credit cards instead of cash or debit cards. Credit cards make it easy to lose track of your spending, especially when you don't feel the immediate financial impact of parting with your money. When you swipe a debit card, the money leaves your account instantly, making you more aware of your purchases. In contrast, a credit card allows you to defer payments, which can lead to overspending. According to studies, consumers spend up to 15-20% more when using credit cards compared to cash or debit. This spending habit can lead to unnecessary debt, which can be avoided by using just one credit card and maintaining control over your purchases.
If You Have Plenty of Money, You May Not Even Need a Credit Card
For people with substantial financial resources, a credit card may not even be necessary, except when making large purchases like a home. If you’re already in a strong financial position, paying in cash or using a debit card might be the better choice. However, having a decent credit score is still essential for securing low-interest rates on big loans, like a mortgage. The good news is, you don’t need multiple credit cards to have a good score. As long as your credit score is in the low 700s, you’re likely to get the same interest rate as someone with an 800+ score.
Building a credit score of 700 or higher can be done easily by using just one credit card. In fact, it’s easier to manage one card and ensure on-time payments than juggling multiple cards and risking missed payments, which can damage your score. Once you’ve reached a good credit score, lenders will care more about factors like your down payment and debt-to-income (DTI) ratio—both of which stem from good money habits.
Credit Cards Can Encourage Overspending
One of the biggest traps of credit cards is that they allow people to spend money they don’t actually have. This can lead to developing bad financial habits, especially for younger individuals who are just starting out. Instead of learning to live within their means, people often rely on credit to fund a lifestyle they can’t afford.
Credit card debt in America has been steadily rising, reaching over $1 trillion in recent years. The ease of access to credit and the ability to pay just the minimum amount each month often leads people into a cycle of debt. According to the Federal Reserve, nearly half of all credit card users carry a balance from month to month, which means they are paying high-interest rates on their purchases. By relying on credit, you risk falling into the same trap of accumulating debt over time.
The Revolving Credit Trap
Credit card companies profit from a concept known as "revolving credit." When you don’t pay off your full balance each month, interest accumulates on your remaining debt. Most credit card companies only require you to make a minimum payment, which can seem manageable, but this is a trap. The majority of that minimum payment goes toward interest, not the actual balance. As a result, people can spend years paying off debt while the balance barely decreases. For example, if you have a $5,000 credit card balance at a 20% interest rate and only make minimum payments, it could take you over 20 years to pay off the debt, and you’d end up paying more than double what you originally borrowed.
How to Build a Credit Score Safely with One Credit Card
It’s entirely possible to build a strong credit score with just one credit card. Here’s how to do it smartly and safely:
Use it for recurring expenses: Use your credit card only for predictable, regular expenses, like your phone bill, car insurance, or Netflix subscription. This ensures that you're using your card consistently without risking overspending.
Set up automatic payments: One of the easiest ways to avoid late payments is by setting up an automatic payment plan through your bank. Make sure you're paying off the full balance each month, not just the minimum. This will prevent interest from accruing and help you avoid unnecessary fees.
Monitor your account regularly: Make it a habit to check your balance at least once a week. This will help you stay aware of your spending and ensure there are no unauthorized transactions or scams. Regular monitoring is a key part of managing your finances responsibly.
