Conventional wisdom may be to carry one credit card and use it for most purchases. Keeping up with the charges would be easier, reviewing and paying the bill would definitely be more convenient.
But carrying a large debt on only one credit card and using only one card can hurt your credit score. A key component in credit scoring is credit utilization.
The amount of debt owed (credit utilization) compared to the available credit line is calculated as 30% of your credit total score. This is a large chunk of what comprises your credit score.
As a rule your balance should not exceed 30% of your available credit line. Loading all your debt on one credit card can lower your credit score.
According to the director of public education at Experian, “Ideally, you should have low balances on each card you hold, as well as a low total utilization rate.”
Avoid transferring a balance from a high interest rate card to a lower interest rate card. Balance transfer offers may be tempting but if you run the risk of hurting your credit score the reduced interest rate may not be worth it.
If all of your debt is on one card pay down the balance as quickly as possible and cease using that card, unless you pay the bill in full each month. This is the only way your credit score will not suffer should all of debt be carried on one card.
The faster you pay down debt the quicker your credit score will increase. Think about ways you can earn extra money to put toward the debt. Perhaps an online home-based can supplement your income. Once you get the credit card debt down to 30% or less of the available credit limit, put that card down.
Again, against conventional wisdom, spread your credit card use and debt around. It is better to spread debt over several credit cards than to utilize one credit card for all your purchases.
Let’s say you have 4 credit cards but all of your debt is on one credit card. That one credit card may be near or maxed out at 100% of the available credit. If the debt was spread over all four of the credit cards, it would translate into each card having a 25% utilization ratio.
There would be no negative consequence for utilizing 4 cards to spread debt as long as the balance remained under the suggested 30% range of your available credit.
