Unless you're prone to overspending, in which case you should limit the amount of plastic you pack in your wallet, there are advantages to having more than one credit card at your disposal. To take advantage of the many features and benefits of credit cards, it can be worthwhile to carry four distinct types of cards.
For one thing, when used responsibly, multiple lines of credit can help boost your credit score.
"If you only have one card you're managing responsibly, that's not nearly as positive as managing several cards responsibly," says Maxine Sweet, Vice President of Public Education for Experian.
Moreover, different categories of cards are tailored to meet specific needs. Here are the four types of cards you should slowly add to your payment arsenal in order to earn more rewards, spend less on interest and build a solid credit score.
1. Rewards card in a category you would spend money on anyway
Debit card rewards are largely defunct; thanks to legislation limiting the amount of money issuers can charge merchants who accept the payment method at their stores. Credit card rewards programs, on the other hand, are thriving as companies try to woo back credit-shy consumers.
But, while the earning potential means it quite literally pays to have a great rewards card in your wallet, don't opt for every swanky product your credit score qualifies you for. Instead, choose one solid card featuring high rewards on a purchase category you spend a lot of money on anyway. Remember, the idea is to earn rewards on spending -- don't spend to earn rewards.
"The card has to fit your lifestyle," says Bruce McClary, director of media relations for ClearPoint Credit Counseling Solutions. So, foodies might opt for a card featuring the most cash back at restaurants, while commuters may want to go with a great gas rebate card.
If you do travel a lot, it may be a good idea to add a travel rewards card to your collection. This product can be used to maximize points or miles on airfare and hotel accommodations, while your general rewards card can be used for everyday purchases.
2. Credit card from the same bank that issues your debit card
Rewards cards are great from getting something back on your purchases, but they're only really worth it if you plan to pay off the monthly balances in full.
"There's going to be a higher cost associated with these cards," McClary says. This generally includes higher annual percentage rates (APRs) and lofty annual fees.
To ensure you don't wind up with a big balance at the end of the month, it helps to pay off purchases each day or week using a linked debit card account.
"That's how you're able to leverage rewards on everyday spending," says Laura Creamer, a financial education specialist with nonprofit credit counseling organization CredAbility.
You can generally use any debit card to pay off a credit card. However, having both products with the same issuer can expedite payments and make it easier to track your spending since you can log into one website to view both accounts.
3. Low interest credit card
Despite your best intentions, there may come a time when you wind up with a balance you can't pay off in full. Your car may need unexpected repairs or your washing machine may stop working. In these instances, it's great to have a credit card with a low, fixed APR on hand.
"I have a low interest card that I use on large purchases," Creamer says. The option helps you spend less money on interest as you work to pay the balance down. Low-interest rate cards typically carry an APR between 8 and 10 percent.
4. Your first credit card
Even if it duplicates one or more of the above categories, you should still hold on to the student credit card you impulsively opened during your college's Welcome Week. This is because closing your oldest card can damage your credit score.
According to Sweet, the closure can raise your credit utilization ratio, since the credit limit associated with the card is no longer available to you. A higher credit utilization ratio tends to lower your FICO score, limiting your ability to qualify for the best credit cards and loan terms.
Closing the account can also ultimately affect the age of your credit report, as closed accounts are completely removed from a person's credit file after ten years.
So hold on to that old card, but make sure to break it out every now and then for a small purchase to keep the account active.
"After the economy crashed, (lenders) became much more careful about looking at their portfolios and closing accounts that were costing them money," Sweet says. Use that old card every so often to avoid getting dinged by maintenance fees, or worse, having the credit line dry up.