Safety Doesn't come in Plastic

I had a friend say she uses credit cards because they're safer. If her purse gets stolen, she won't lose so much money.

She couldn't understand why I bent over laughing.

Yes, if someone steals your cards and you're lucky enough to discover this fairly quickly, and you can find the special number you have to call to report a lost card (that number came with your credit card; you tucked it away in a safe place, right? Next to the list of all your credit card numbers?) you probably won't be on the hook for more than $50 .

Per card.

How many cards do you have in your wallet? Three or four general cards? (Discover, Master Card, Visa.) Two or three gas cards? Four or five store cards?

So, let's say you're carrying ten credit cards and $20 cash. And your pocket is picked, your purse is yanked, or your friendly neighborhood mugger requests that you hand over your wallet...or else.

You've lost $20 cash....and potentially $500 or more in false credit card charges that the card issuers won't cover. And you have to call those ten credit card issuers, plus your banks, plus your mortgage company. And you have to pray that you get all this done, and the word gets out to thousands of merchants and financial institutions that your cards have been stolen before the thief uses your cards to obtain other cards. And charge thousands of dollars in merchandise. And open checking accounts in your name. And makes your life a living hell.

For years.

By contrast, suppose you only carriy two cards, a Master Card and a Visa. You also have $200 cash in your wallet, which is what you estimate you'll need per week for basic shopping.

Your purse or wallet is snatched. You're out $200. A definite financial "ouch," but hardly a disaster. Plus you're out another $100 in potential uncovered charges. $300 at risk instead of $500.

And the only credit card companies you have to call are Visa and Master Card.

Why does anyone need a dozen credit cards in the first place?

The answer is, of course, that you don't.

I've yet to run into a mainstream retailer who wouldn't accept one of the major cards, especially Master Card and Visa.. So I--and you--don't need their cards. There's no benefit for us.

There's a however, a big benefit for them. When someone uses a credit card, the merchant involved has to pay the card issuer a percentage of the purchase price as a fee. Contrast that with a merchant who is also a card issuer instead getting all that nice interest that you pay. Plus, you're more likely to spend money in their store-—or at their gas stations, restaurant, etc. etc.—if you have their card. No wonder they'll give you ten percent off your first purchase. (Then charge you considerably more than that for any balance you don't immediately pay off.)

These days, you almost have to have credit cards to establish credit. Otherwise, so far as the financial industry is concerned, you're well-nigh invisible. But you don't need more than one or two of the major cards. And there's no law that says you have to use them more than is good for you...which, frankly, should not be very often.

Another advantage of not having a wallet full of credit cards? Information on all those cards' credit lines goes on your credit record. Even if you don't charge much on each card, a potential lender knows that you can....and may decide that you're therefore a poor credit risk. Keep the two or three low-interest cards you've had the longest, especially if you've paid faithfully on them (establishing that all important good credit record.) Pay off and close the cards you don't use.