How much available credit should a person have via credit cards?

Is there a financial guideline, rule of thumb, etc. for how much credit a person should have via credit cards? I am a responsible user and pay off my balances every month. I often wonder how much credit I should carry beyond my regular spending patterns. Should I keep as much as possible for an emergency, or should I streamline and eliminate extra cards/credit due to the risk of identity theft?|||For starters, congrats on being one of those that pays off your credit card each month. I'm also in the club. Interest is one of the worst ways to spend your hard-earned money.



That said, you should NOT increase your credit limit without reason. Here's why... When you apply for a loan, such as a mortgage, they look at your credit card debt - of course. Odds are that your credit rating is very good. However, they also look at your credit limit. This suggests the amount of debt that you might accrue in the future, and it can hurt you.



Personally, my monthly credit card bill runs around $2000-3000. It occasionally spikes when I pay my home and auto insurance bills. My credit limit is $15,000, and I see no reason to increase it.



As far as the number of cards, you should have one primary, all purpose credit card. This should offer some sort of perk, like frequent flyer miles, even if there's an annual fee. You should also have a second card with NO perks and NO annual fee - that you never use. If you start finding charges on your statement that suggest that your regular card number has been compromised, cancel the card immediately, and while you're waiting for the replacement (it could take a week or so), you can use the fallback card.



I see no reason to have more than two credit cards, and as I said - only one is being used regularly.|||What matters to your credit score is how much total credit you have, compared to how much you are using. For example having credit cards with a total credit limits of $10,000, and total credit card debt of $1000 to $2000 is better than $5000 of total credit with the same balances. This is the reason it is sometimes not advisable to close accounts you are not using - to do so would drop your total credit relative to credit in use. Of course, if you become the victim of identity theft, the good credit score you used to have might not be much consolation.|||Ideally, you should have no credit available via credit cards.



The reason is that an open credit line is like a trap. You use it, you pay exorbitant interest rates, and most people only pay the minimum payment, which means you will be paying those exorbitant interest rates for decades (literally.) You are good in paying off the balance each month, which builds your credit rating, but can you be that disciplined forever? Most people can't.



For an emergency, you should have cash stored up in a savings account. Six months' living expenses is the usual recommendation.



But credit cards are convenient, both in emergencies and in everyday use, and if you never get any loans of any kind, it is hard to build up your credit rating.



So I would set one with the lowest limit you can practically handle, perhaps $1000. If you pay off the balance every month, you will build your credit rating, and the low limit will not hurt your rating (excess available credit hurts your ability to get loans for other things like cars or houses.)

And use a debit card for everyday purchases like gas or groceries. The money comes right out of your checking account, so there is no interest charged at all.



One way to use a credit card responsibly is to set it up to automatically pay small fixed expenses, like your cable bill, then have your bank pay off the balance automatically out of your checking account. That way you will never miss a payment, you won't pay any interest, you will never use the card for stupid things, and your credit rating will go up.|||Depends on way to many factors to accurately answer but you need no more than 2 or so cards in your wallet. Never close the accounts out though because the longest held are you most valuable credit asset.|||I highly recommend The Total Money Makeover to anyone whether they have debt or not. This plan will show you why you don't need credit cards for emergencies. I will start with Step 1, however, if you have no debt, you could skip to step 3.



I see your icon says "God is Good". I agree with that and so does Dave Ramsey. Why the book is not classified as Christian, Dave Ramsey is a Christian and he does use scripture to support his answers. Here's the first 4 steps and a brief glimpse of the last two.





Step 1 - Create a $1000 emergency fund. This money should be put in a safe place where you can get to it if you need it, but not somewhere that you'll be tempted to use it. I use a money market account that draws about 5% interest, yet I can withdraw it any time I need to without penalty. This money will be used in case the car breaks down, the refrigerator breaks, etc.



Step 2 - Pay off all debt smallest to largest. Pay as much as possible on the smallest debt and pay the minimum payment on all the others. As soon as that small debt is paid off, take all that money and apply it to the second smallest debt. This step does not include paying off a house. Just credit cards, student loans, cars, etc. This is what Dave Ramsey calls a debt snowball.



Step 3 - After all debt except your house is paid for, save 3-6 months expenses and put it into your emergency fund. This can be used in case of a layoff, or a sickness, or something else big. Again, it's for emergencies only. This is why you don't need credit cards for emergencies.



Step 4 - Begin saving for retirement.



Step 5 and 6 go on to pay for a house, save for your kids college, etc.



I highly recommend that anyone with debt read this book. I've included a link below. I've never heard anyone say they weren't glad they read this book. This plan changes most people lives.