A Correlation Between The Number Of Credit Cards One Has And Net Worth

Average credit card interest rate chartI believe the ideal number of credit cards is three or less as stated in my  post, “How Many Credit Cards Is Too Many?” One of the main reasons for having three or less is so that you don’t spend too much time playing the churn and burn game for rewards points. Once in a while is fine, but there is a law of diminishing returns.

If you’re spending time applying for new credit cards, reading about new credit cards, keeping tracking of all your credit cards, and canceling your credit cards, then you are taking away time from making more money elsewhere. Your mind focuses on the small picture when it should instead be focused on the big picture. Furthermore, unless you are an organizational machine, you will undoubtedly miss a payment or forget to cancel your card before the introductory period is due thereby negating some of the initial sign up benefits.

Everybody should have at least one credit card for convenience sake. Many credit cards have travel insurance which comes in handy when you lose your luggage in a strange land and need a place to stay. Credit cards help build credit which is important for individuals looking to buy a home or apply for a coveted job. Buyers protection is also a great reason to have a credit card just in case you want to dispute a vendor.

THE IRRATIONALITY OF PERSONAL FINANCE

Given personal finance is pretty straight forward, I’m always curious to understand the kinks in rational reasoning:

Why do people get into so much consumer debt if they don’t want to work forever?

Why not just try harder to get ahead?

Why do people believe they deserve an “A” lifestyle if they were a “C” student?

Why not join a more lucrative field of work if you want to make more money?

Why freeze for six months a year when you can be warm all year round?

Why quit your job when you can get laid off with health insurance, severance, and unemployment insurance?

Why contribute to a ROTH IRA when the government mismanages our money?

The list of kinks go on and on and I find every single one of them to be fascinating! We all know what we should be doing, yet so many times we can’t be bothered. I’ve written about my own paradoxes by purposefully playing devil’s advocate in order to find clarity e.g. The Dark Side Of Early Retirement. What kind of dummy leaves a multiple six figure job anyway? Ridiculous!

With credit cards, I’ve received a lot of push back from the community on why three credit cards is too little and why we should all be signing up for as many credit cards as possible since it’s free money. One fellow blogger retorted on Twitter,

You have a lot to learn about credit cards my friend :) – guy with #23cards and a #730creditscore.. #neverbeendenied

I’m thoroughly impressed someone has time to sign up for 23 credit cards. But when the average credit score of a rejected mortgage applicant is 729, maybe not so much. The purpose of my post on the ideal number of credit cards is not to see who can get the most credit cards. The goal of the post is to encourage people to utilize their time more wisely and look beyond the addiction of credit card rewards after a certain point.

EXPLANATIONS FOR MY THEORY ON CREDIT CARDS AND NET WORTH

I postulate the more credit cards you have, the lower your net worth and vice versa. Here are three variables as to why.

1) Age. Young people have more time on their hands. When you have more time on your hands you tend to waste time with suboptimal activities such as spending time on Facebook and credit card churning. Younger people appreciate a $100 benefit more than an older person with a family and a much higher net worth. If you’re only making $15 an hour, the $100 in rewards points is worth seven hours of your working life! If you’re making $100 an hour as a seasoned professional, then you really don’t get excited anymore.

2) Education. If you aren’t an odd duck who spends hours understanding what goes into calculating your credit score like me, then you have no concern for opening up as many rewards cards as possible. It’s like never finding out what ingredients go into your favorite food. If you knew how much buttercream went into your favorite cupcake, maybe you wouldn’t eat it no more! It would be dumb not to open up a Macy’s card which will save you 10% off your $500 purchase. But as you all know, there’s a point of diminishing returns where opening up too many lines of credit begins to hurt your credit score. The lower your credit score the higher the interest rate for bigger ticket items such as a home. The higher the interest rate, the less disposable income you have. The more education one has about real estate, the stock market, interest rate parity, and the make up of calculating a credit score, the less inclined they will be in taking out so many credit cards.

3) Discipline. The “spend more save more” mentality is huge among lower income groups who focus on quantity instead of quality. “Buy One Get One Free” is a staple advertisement ploy at places like Walmart and JC Penney for example. Discount stores compete on VOLUME since their margins are so low due to price. Hence, their goal is to make consumers buy as much as possible, often times much more than they need. The more you cannot control your spending, the less you will have. It’s been shown that cash payers spend much less than credit card payers. Delayed gratification is one of the hallmarks of personal finance. If you crave instant gratification and are addicted to “freebies” then you have a higher tendency to open up multiple credit cards.

Bottom line: There is a strong correlation between net worth, age, education, and discipline.

MY CREDIT CARD EXAMPLE STATES THE CASE 

I just look at my own scenario when I was in my early 20s. I had five credit cards because I made way less money, didn’t own real estate, had a much smaller net worth, and valued $1 more than I do now. Now that I’m in my mid-30s I’ve got three credit cards, one of which I just keep open and never use because I’ve had it for nine years. My other credit card is my corporate card which is a must for bookkeeping and tax purposes. My personal spending card is my Barclaycard Arrival World Mastercard since I’m a travel maniac now. The card provides 40,000 signup points and earns me 2X rewards points for every dollar earned if you are looking for a rewards card. The first year’s fee of $89 is also waived.

Perhaps I was able to get $1,000 a year in rewards credit card freebies by churning when I was in my 20s. But if I had spent that time focusing on working harder at my job or coming up with a side business, I’d probably make 10X that amount because of a promotion, a good investment, or a great idea.

The goal is to get out of the small money thinking and get into the big money thinking. If you want to grow your wealth, you don’t want to be hanging out with folks who keep thinking in emergency fund terms.

TIME TO TAKE THE ANONYMOUS SURVEY!

Before clicking on your survey choice below, I’d like for all of you to think about whether there is a correlation between the number of credit cards one has and their net worth and why.  In order for this poll to work, please be honest. The poll is completely anonymous.

I’ve included three credit card numbers (1-3, 4-8, 9+) and four net worth figures (less than $75,000, $101,000-$250,000, $251,000-$500,000, $500,000+) for simplicities sake. The average income of readers here is between $70,000-$85,000 based on an old poll hence the $75,000 lower limit. While the average reader age is between 27-34.

I realize there are those with 0 credit cards and broke, and those with 20 credit cards and are multi-millionaires, but you’re a rare bunch so please choose the closest answer to your situation. If you’d like to comment on your net worth feel free to do so as well.

How Many Credit Cards Do You Have And What Is Your Net Worth?

View Results

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CREDIT CARD RECOMMENDATIONS

Barclaycard World Master Card: If you are an avid traveler and looking for a travel rewards credit card, you can sign up for the Barclaycard Arrival World MasterCard with no annual fee with double the points on travel and dining and 20,000 signup miles ($200 value). Barclaycard offers $200,000 in automatic travel accident insurance, reimbursement for expenses if your bag is lost or delayed, trip cancellation coverage, and $0 fraud liability.

Discover Credit Card: Are you looking for the best credit card for balance transfers, flexibility, and rewards? Check out the benefits of the Discover it® credit card and maximize your purchasing power. You can earn 5% cash back rewards without any annual fees, over limit fees, or foreign transaction fees. And did you know Discover has been ranked #1 for customer loyalty for 17 years in a row? Discover it cards are accepted at over 9 million merchants nationwide and their U.S. based customer service team is available 24/7. Just remember to spend within your means!

Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance. The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is?

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    Sam there is a definite correlation with lower cards and higher net worth. Higher net worth are often rewarded with more perks, to build perks you need to favor specific companies. If you scatter all over the place you can never build that. When I was younger I was foolishly proud that I had $100,000 credit limit on 8 cards, today I only use two. The points I rack up solidify my upgrades with these companies.

    • says

      Charles, good point on concentrating points and assets. I really appreciate the service I get with my main bank. They are always response to my needs after being a client for 10+ years and taking out multiple products. Can’t concentrate too much though due to FDIC insurance limits. I have a post on concentration in the queue.

  2. says

    I have one credit card. To be used in;
    – In case I forget to transfer enough money into my normal savings account.
    – Online purchases (great international exchange rate on it).
    – For insurance (automatic flight cancellation insurance)
    – Emergencies.

    I rarely use it and prefer to just use my savings account. I find I’m much more careful with my spending habits when I’m spending my own money.

    I believe there is a correlation between the number of cards and net-worth. Credit card companies aren’t dumb. They know how the game is played, and most people know how it’s played as well and yet choose to play it.

    Sure some may end up ahead by being stringent in their use, but people who constantly talk about bonus’s they can get on their cards are normally spending a lot on useless crap to receive those bonus’s.

  3. says

    I was going to write a comment about how I think the various ages will confound this pole, but I don’t want to be a hater. I’m curious about this, but I’m going to guess that most people regardless of net worth have between 1-3 credit cards.

    • says

      Age is definitely a factor as I wrote as the first reason for the correlation. Younger folks make less, and have more time on their hands to churn.

      I’ve included three credit card numbers (1-3, 4-8, 9+) and four net worth figures (less than $75,000, $101,000-$250,000, $251,000-$500,000, $500,000+) for simplicities sake. The average income of readers here is between $70,000-$85,000 based on an old poll hence the $75,000 lower limit. While the average reader age is between 27-34.

        • says

          Now that’s a great NW growth rate! Any secrets to your NW growth? How old are you?

          I would love to get a consistent 1/3rd your growth rate. You’ll be a millionaire in 8-9 years without a doubt!

        • says

          No secrets other than what you already know about, low spending and high saving relative to income. 30 years old and expecting the 1 mil mark around 37 conservatively based on no increase in savings and 8% return.

          I wish I had done the math when I first started working, I would be much closer to the end of forced work and into what I like to think of as recreational work.

  4. Ace says

    You realize that applying for a credit card takes about 10 total minutes, right? As you don’t have a real job, I find your condescending attitude funny.

    • Laura says

      No need to be nasty…

      Anyway, I think it’s less about the time it takes to apply, and more about the mental energy that goes into researching a card, remembering which card to use at which time and when to pay off each card, etc. That said, I’m one of those people in their early 20s with tons of time for such things, so none of that seems particularly onerous to me. I just like to keep it simple – two rewards cards (one for groceries, one for everything else) and one normal card that I keep because it’s my oldest line of credit.

  5. Alex says

    I look at it this way. 15 minutes to fill out a credit card application, 15 minutes to scrutinize my monthly statements to make I meet the minimum spend requirements, and 30 minutes on hold to cancel a credit card. So, for about an hour of my time I can earn $500+. As long as my hourly rate at work, or in pursuing side income, is lower the credit card game is worth playing for me.

  6. says

    We have 4 credit cards. One is a college credit card my husband never used. 1 credit card I recently opened, but I need to close it because I never use it. I think the best number is 3. 1 credit card where everything goes (Discover for us) and another for car insurance (VISA). If you have a small business then a corporate business card is your third option.

  7. David M says

    1) On average your Thesis is most likely correct. I would be shocked if it was not. I would think there is published articles that would absolutely prove you correct.

    2). However, for any given individual they might have a high networth with lots or few or no credit cards. As I have mentioned a few times posts before, I go on a 5-6 week vacation every year to Asia or India. The coach airfare is going to be about $2,000 a ticket and the business or first class is going to be $10,000 a ticket. I would never pay to to fly in business or first class BUT I am willing to spend a small amount of time getting the points to be able to do this. This year we are going to taiwan and Japan in business class. Last year we paid for our fligts. 2 year ago we flew first class to Asia.

  8. says

    This fascinates me. I’m a zero credit card advocate, but I have one in case of emergency, or for putting purchases on that I’m expecting my company to reimburse me for.

    My thought is that all the rewards points are simply bait for you to use the cards. Like you say, worrying about the small stuff instead of increasing your income and managing your expenses.

  9. says

    I think the line would be fairly strange and more like a sin/cos wave than a straight line.

    People in debt have lots of cards, many people with low net debt have none, then people who use credit cards well have a fairly decent net wealth and lots of credit cards, and then finally very wealthy probably don’t have many credit cards (as the points rewards really aren’t worth their while).

  10. Austin says

    You created a net worth distribution profile of your readership (although it’s pretty much statistically insignificant). That could be helpful.

  11. Carol says

    I agree if one has 500k income, paying for first/business class seats and five star hotel wouldn’t be such a pain, and time and effort becomes more important. But as a lowly 120k income person, I need the airline miles to fly business class and let my family fly in business class. I also want to rather stay at park hyatt than holiday inn. I enjoy that. I have been able to do all this because of the credit card game. Yes, I am organized (it’s my hobby doing this) and you’d have to enjoy being involved in this game otherwise it’s too risky if you start missing payments etc.
    And the truth is this credit card rewards game is not sustainable if everyone starts doing it. We need someone who pays the bank credit card interest, annual fee, and so on in order for the bank to fund my business class tickets. So, if it sounds like a bad idea to you, you certainly don’t have to do it ;-)

  12. says

    My wife and I have 2 main cards: An AmEx with 2% cash back, and a Mastercard with 1% cash back. The Mastercard is used at places that don’t accept AmEx. My wife also has a Discover card so she can buy “gifts” without me seeing her charges. We never carry a balance on any of them.

  13. Carlos O says

    I want to suggest another analysis variable / poll. I believe this matrix could be more meaningful if you add the Credit Card debt and annual interest rate (average).

    CC can work in your favour, for example I use my cards to get special monthly payments with no interest, really helpfull when the car need a change of tires or other $500+ expense. Also you can get other benefits according to the loyalty programs of your bank and the business you are purchasing from, such as upgrades in travels, extended warranties in electronics and vehicles, 2×1 movie tickets.

    So I have many cards and I might have CC debt if you see my net worth dashboard, but Im nor paying more (interests or annual fees ) and I’m getting some goodies that I really value (savings). Also working for a better credit report as the payments are linked to my check acct.

  14. Mrs. Stewart says

    Thank you for your recommendation of the Barclay Card. I got one and I almost have enough points to purchase 4 airline tickets for my family, just by using the card to pay my monthly bills that I have to pay anyway.

    I am working towards financial independence and I have 3 credit cards that I use, and I have another 3 credit cards that are open because they are the oldest reporting on my credit report.

    I also believe the more credit cards you have, the more suspectible you are to spending beyond your means. You are prone to have more emergencies, as a means to justify the spending. It does take a conscious effort, not to use credit for frivilous expenses.

    Just my 2 cents.

  15. nbsdmp says

    I am in the camp that if you extremely disciplined, hell have as many cards as you want. The reality is once your pile is large enough, you will want simplification in your life…not more crap to remember. For me any minor benefit doesn’t begin to move the needle from a stand point of making it worth my time, similar to a Mortgage…why have one if the 3%-5% spread you are going to “risk your principle to work for you” doesn’t change your lifestyle one bit. All it can do is cause drama.

  16. says

    Yes, there is an inverse correlation. Many years ago, I had a couple dozen credit cards (all fully loaded) and a negative net worth. Now I carry three cards (paid off every month) and have a substantial net worth.

      • says

        At the time, I was self-employed. I first had a few credit cards that I used normally, and also borrowed against a couple to use towards a down payment to buy a rental property. During that time, I was inundated with credit card offers with no annual fees and teaser rates, and easy to apply applications (I just had to check the box that said Yes) so I went ahead and got them, figuring I could use them as a large line of credit for emergencies. Some cards I even received without asking. If I had a VISA card, the bank would send me a MasterCard with a $5,000 credit line saying that if I didn’t want it, I could return it.
        To make a long story short, my self-employment income dropped to almost nothing for about nine months straight, I starting borrowing against cards to pay living expenses, thinking I would pay it back when things turned around. And I had to borrow to pay the monthly payments on the cards. The real estate market declined, the credit debt increased causing the negative net worth.
        One of these days, when I feel like opening up about it, I will write an article on my blog about how I got into that mess, and a subsequent article about how I got out without declaring bankruptcy.

  17. says

    You really need at least two credit cards, because some parts of the country won’t take certain cards as readily. (Discover, for instance. It’s not always very big in parts of Europe, either.)

    So if you carry more than one type, you’ve got options.

    I would agree, though, that the fewer the cards, the easier it is to keep track — and the less temptation to go ahead and put that purchase on the card, anyways, even though you can’t afford it.

    And my credit score’s in the 870 level, to the guy with 23+ cards…

    • says

      Gee, maybe I misread it…

      Oops (she says with a red face). Serves me right for blatting off my mouth. Just checked — it’s 792. But that’s better than 93% of other Americans. And we have been really, really careful to pay bills on time, with only a few slipups in 3 decades of marriage.

      Thanks for checking me on that one, FS. Apologies for the misspeak.

  18. Joshlips says

    Sam,

    I think you’re missing a key question: how do you use your credit card? I am the (currently) only respondent with 9+ cards and 500k+ net worth. All of my credit cards are or autopay, so they effectively act like debit cards. I treat them as such and thus don’t run the risk of getting into credit card debt.

    Also, what purpose do the cards have for the user? For me, each card has a distinct purpose and is stored accordingly. Only 3 remain in my wallet: a gas card (3% cash back), a dining card, and a retail card. Splitting it up this way also makes tracking spending a piece of cake (and eliminates the need to identify “uncategorized” transaction in software like mint.com or personalcaptial). The other cards are for other uses (home improvement, travel, etc). Further, I designed a database (45min of work) that allows me to type in or say the name of the retailer from whom I’m purchasing. The database tells me which card to use.

    Given the assumption that I want to know where my money goes, the aforementioned methods (database and card use by transaction type) actually SAVE me time when compared to not using these strategies.

    • says

      Yes, good points Josh. However, if the survey holds up, your entry will be removed for analysis given every good scientist removes the high and low for better statistically significance. It’s important to compare against the overall picture and not just look at your own.

  19. says

    I’m mostly just interested in seeing the data. I think a case can be made for either side of the argument: churning may end up being a good approach to a point, or it may end up costing the consumer money (esp. when compared to cash). Studies on this front are amazingly few and most don’t account for the possible differences between cash & credit users (e.g. – are credit users simply more affluent, and that’s why their spending is higher?)

    I personally use 3 cards and one of them is for a churn, but I’ll admit that, like with most things, I’m probably not entirely aware of what’s optimal for my spending behavior.

  20. says

    I think people who use more credit generally have less net worth, but I am not opposed to the churning philosophy if you only buy what you need and pay it off every month. Having new credit cards does not make me feel like I need to spend more, been there, done that. It isn’t appealing anymore. I will spend time researching a churn. I think it’s more of a hobby and doesn’t really take time away from other ways to earn money. You can’t work 24 hours a day, and it’s just as fun to figure out how to get a free trip for me than to watch a TV show. The other reason I enjoy credit card rewards is because I will probably never shell out for things like first class flights or 5 star hotels, at least until our mortgages are paid off. For the three of us to fly to Hawaii in first class, it would be around $2700, and I would never spend that, but we are going to do it next summer from rewards.

  21. Lance @ Money Life and More says

    In order for this to be a more accurate representation, you’d need to keep age in a set range. If you added that to the variables you’d probably get very different results.

  22. Ace says

    Sam,

    It looks like your theory is holding up. My question is how are you defining NetWorth?

    Liquid assets only? Or liquid assets + real estate? Or…what about people that also have pensions?

    BTW…. My apologies…. I don’t mean to complicate things…. Just wish a bit more clarity; and it might make for very interesting data. Folks whom are following this blog appear to be doing rather well.

  23. MH says

    Your results are skewed. Readers of a personal finance blog are going to have a higher net worth than people who don’t read such blogs. People who get by paycheck to paycheck and think they are doing everything right probably aren’t even aware personal finance blogs exist.

    Sorry, I really think this poll is meaningless.

    • says

      No problem. There are plenty of folks who believe people who read personal finance blogs do so to solve financial problems, just like those who read fitness blogs want to get in shape and so forth.

      What’s meaningless to you may be very meaningful to other people.

      What’s your age, NW, and CC amount? Thanks

      • MH says

        Just to clarify I did not mean that in an offensive way; I just look at it like I would look at a pole conducted at a hospital asking how people are feeling; off course the results are going to be skewed in the “not too well” direction.

        In any event, I take your point about people wanting to get better also reading these blogs, even if I still think your results are going to be skewed to represent financially minded people, not the population as a whole.

        I have 2 credit cards, a Fidelity Investment Rewards card (unlimited 2% back) and a Macys card. I never carry a balance. Net worth for me personally, not counting home equity or the wife (we keep finances separate) is approaching 500k, including the wife close to 900k, with another 350k in home equity.

        • says

          Shouldn’t your hospital analogy help prove my position that people in financial trouble go to financial sites for help just as someone who doesn’t feel too well goes to a hospital to get better? In other words, you are arguing opposite of what you said.

          I’ve always held the belief that there is more money out there than we can imagine. Due to big government and higher taxes, it’s more fashionable for wealthier people to conduct stealth wealth instead.

          Check this article out, “People Make Way More Than You Think” I wrote in 2011. Now increase those numbers by 10-30% on average now that it’ 2013.

          Forgot to ask your age.

        • MH says

          Im 36.

          My example was to illustrate that the polling forum can skew results. If the question is “Are people generally healthy?” and you conduct your poll in a hospital, the results are going to be off. Your poll question is about financial health (at least partly), and you are asking in a financial blog. Your results are going to be off.

          Just looking at them, currently 27% (23 + 4) of the responses answer >500k net worth. No way that is representative of the population as a whole.

          • says

            True, but like I said, I think there is much more wealth out there than we know. It’s all about keeping our money hidden from demonstrators and the government.

            Your roughly $500,000 NW ex primary residence at 36 is not bad. But practically every person I know in person who is 36 has over a $500,000 NW even, though my post on the average net worth by age has a 35-36 year old pegged closer to $300,000.

            Everybody likes to say OTHER people don’t save, don’t earn as much, are in financial trouble etc. The fact is WE ARE THE OTHER PEOPLE and it looks like most of us are doing fine. Are we to argue that only a national representation of statistics is the true measure, when I don’t live “nationally” but in SF, and you don’t live nationally but in wherever you live? I don’t think so.

            I can’t save, help, or interact with the nation. All I can do is do the best I can with the FS community.

    • MH says

      grr I can’t reply to your latest comment directly, so Ill reply here.

      I’m not quite sure what your point is. I only mentioned my NW counted various ways cause you asked.

      This article is about a hypothetical correlation between net worth and credit cards. I think with your poll you are trying to gather data to support or refute that hypothesis. My point is that any data you gathered is going to be skewed because your poll-conducting methodology is flawed, by nature of where you are conducting the poll. You poll suffers from both selection bias and confirmation bias.

      I contend that the fact that (as of now) 48% of poll respondents have a net worth > 500k is evidence of a flaw, because there is no way that 48% of credit card holders have net worth that high. You respond that everybody you know has a net worth > 500k, and that people have more money than everybody thinks. But again: 1) the NW of the people you know has nothing to do with the bell curve describing the NW of average americans, and 2) I would argue against the notion that there is a bunch of hidden wealth among people with less than a million dollars, but that is another discussion completely.

      Also, I completely agree with your hypothesis; I just don’t think you are proving anything with your poll.

      @MH

      • says

        May I ask how you would conduct your poll for your blog? Please share the questions and variables you would ask so that it has meaning.

        The point of the NW is to show that more people have $500,000 in net worth than you might believe, including yourself, so don’t be surprised that so many people have over $500,000 in NW.

        Although the reality of my world and my numbers might not be real to you, they are real to me and the 350+ people who answered the poll. I wouldn’t so summarily discredit the realities of so many people. Of course this is not the experiment from the Science Journal Of America. I just encourage you to accept different variables and realities of people’s lives.

        • MH says

          Please don’t take my comments to be an attack against you or your blog. I enjoy this blog thoroughly, even though I don’t always agree with what I read. Also, I am not saying this poll is not fun and interesting. Finally, I am not an expert in polling or statistics, so I could be completely wrong. (But I don’t think I am)

          Let’s think about what you are trying to accomplish here. I am assuming your goal is to conduct a poll that identifies a correlation between CC number and net worth *among the general population (as opposed to readers of finance blogs)*. If that is your goal, then you need to conduct your poll scientifically. Also, you need to limit your selection/confirmation bias.

          I don’t think you can accomplish this by conducting a poll from a blog. Again, the venue for your poll is skewing your results because your readership probably has a high degree of financial literacy, which means your poll subjects are not typical (that is probably an interesting blog topic btw, Financial Literacy). In other words, your poll suffers from selection bias because your test subjects are not typical of the group you are trying to study.

          I think this poll suffers from confirmation bias because it is not detailed enough, i.e. you are setting yourself up to interpret your results as you want to. Case in point: currently the majority of poll respondents with >500k NW have 1-3 cards. You are probably interpreting that to support your hypothesis. However, you are not asking enough questions, and I would argue you are asking the questions incorrectly (although I understand you are trying to keep this simple; my point might be that there is no simple way to do this):

          1. You should ask about number of credit cards and NW in separate entries.
          2. You should be asking about the different details of NW and doing the NW calculation yourself (i.e., what is the sum in your checking acounts? Retirement accounts? How much equity do you have in your home? How much CC debt do you have? How much student loan debt do you have? How many times have you consolidated CC debt? — all of this to gain a more accurate view of NW)
          3. You are only considering CC, not lines of credit, home equity loans, car loans, etc..
          4. You are not asking about extenuating circumstances (high medical bills, etc).
          5. You are not asking about financial background, educational background, etc

          See my point?

          • says

            I see your point. But I did think you were a polling expert or social scientist given your comments.

            Can you point me towards an ideal poll in your eyes? I’ll see if I can mimic it.

            Finally, my main point as written in the article is the ideal number of credit cards is three or less and to encourage people to focus on big picture financials instead.

            Do you think this one poll distracts from the 1,500 words written in the article about my message? Imagine if there was no poll, could you better understand the play’s thesis? I’m always curious to know how readers react because I think one way and make assumptions which are often wrong.

            Thx

        • MH says

          I am not typically a connoisseur of polls, so I can’t point you to any polls that I consider to be a work of art. :)

          I definitely got the gist of what you were saying. And I agree with the point that having less credit cards is simpler, at least for me. I actually think this is the knock-out statement of this article

          “Bottom line: There is a strong correlation between net worth, age, education, and discipline.”

          I absolutely agree with that.

          The whole thing about the CC and the poll might bring people off that point. And I’m not sure the number of CC one has is really a good indicator of financial health. I agree that having a bunch of credit cards can indicate bad things, but it doesn’t necessarily mean bad things. After all, if you have 10 CC but only use 1, you might as well only have 1 CC. Maybe the more interesting question vis-a-vis credit cards is how many credit cards do people use, and how does that relate to CC debt.

          In fact, upon further analysis the presence of your poll it seems as if what you really meant to say was

          “Bottom line: There is a strong correlation between net worth and number of credit cards.”

          which I don’t agree with.

    • says

      Hi Kristy,

      From the post: “I’ve included three credit card numbers (1-3, 4-8, 9+) and four net worth figures (less than $75,000, $101,000-$250,000, $251,000-$500,000, $500,000+) for simplicities sake. The average income of readers here is between $70,000-$85,000 based on an old poll hence the $75,000 lower limit. While the average reader age is between 27-34.”

      That said, I wasn’t too aware of the net worth aspect which I’m pleasantly surprised so far.

  24. says

    Can I at least get a link to my site if I’m going to be mentioned in the article?! haha

    Anyways, you are right on with your assessment and I think the poll shows that. As you make more and more money, the benefits from credit card sign ups will decrease since you are making more per hour that could easily outweigh the benefits of a sign-up bonus. Some commenters have alluded to the fact that one credit card only takes a few minutes to sign up and you have $500 in bonuses. The only problem with that is you have to use a variable pricing model as your # of credit cards go up.

    It is a lot of work to manage 23 cards but I’ve gotten pretty good at it. I use a simple spreadsheet that tracks sign-up dates, anniversary dates, when the AF will hit, etc. I always setup autopay as soon as I get the cards and they get auto added to my Mint account so no need to ever worry about missed payments. And if you do get hit with an AF or late payment, you can always get the charges reversed by canceling the card or sending a quick e-mail btw.

    As for my credit score, 730 is enough for anything and everything except for a mortgage I guess. I already own one property but I am looking for another one in the next year or two so I will probably slow down my churning to reduce my inquiries and cancel some of my newer cards to boost my average age. Those are really the only things that are affected by multiple apps though, which can be easily manipulated if you plan ahead. The # of cc’s(holding more cards that is) you have does not hurt your score contrary to popular belief.

    I think there’s a nice sweet spot for people making 50-150k range where cc sign up bonuses can really make you some money. One thing you forget to mention is that these bonuses are tax free. So if you’re making 100k a year, you’re right in the sweet spot for cc bonuses since every $500 you get is closer to $900 since it’s tax free right? Checking bonuses on the other hand are taxed.

    I think some bloggers/people tend to glorify credit card churning as an easy way to make a lot of money. I don’t think it’s that easy but I look at it more like a side source of income that pays really really well. I sincerely hope that one day it’s not in my best interest to churn credit cards because I make too much, that would be awesome.

    But for now, I can get a $2,500 hawaii trip paid for by signing up for a few credit cards. 5 days 4 nights in Hyatt Grand Kauai(1 night in a suite!), 2 RT tickets from Orange County to Kauai, and a rental car for 5 days. If I were to pay for that myself, it would be with after tax dollars and I’d have to make close to $4,500…F that!

    See you there in December?? I know how you love Hawaii

  25. says

    I second Harry’s sentiment. I can’t reveal my income, but it’s just above the average American. I am putting time into earning more via blog and other online ventures yet to be named. And credit card churning is actually a skill needed in making some of those opportunities a reality.

    Reading about deals and churning cards is leisure for me. Some may read book, other’s relax by the pool, I love learning about travel deals. It just so happens that my leisure pays dividends, in the multiple thousands of dollars.

    I only started at the beginning of this year, but am on track to gain $6,000 – $10,000 worth of travel and cash rewards by the end of the year. I could try to go make the money elsewhere, but this takes minimal time and effort, and has MAJOR benefits. I’m taking a family of 7 to Hawaii for 10 days, including rental car (got a place through VBRO, cash back cards to pay for most of it). It’s a $7k – $10k trip on it’s own, and we would NEVER go, but my mother in law really wants to go out there for her 50th, and I was able to make it a reality. Great family fun and very little out of pocket costs.

    As Harry said, I have a simple spreadsheet to track it all, and have not been hit with any fees or interest, and my spending has not changed either. My wife and I have a credit score of about 760-770, and it has been on the rise other the past few months as I am not singing up for new cards until January. I leverage my score for travel and fun we would not otherwise be able to do, but my happiness is not predicated on these trips. They are just icing on the wonderful butter-cream cake that is my life, and I love all the ingredients ;)

    I currently only have 11 cards open between my wife and I, and probably won’t go too much higher than that, as my churning begins in January to cancel/transfer old cards and pick up new ones.

    I’m 27, and my net worth isn’t HUGE, but I think it’s pretty good, and heading in the right direction. I have the ability to pursue all the things you suggested above, such as better jobs (working on that right now), more side hustles, and real estate (not quite yet). But I can also enjoy the perks of credit card rewards while the getting is still good.

    • says

      I like how you say credit card churning is a hobby. I can see that because who doesn’t like getting something for free? I just caution folks not to take the hobby too far.

      I’m digging how you and Kim are taking $5,000-$10,000 vacations to Hawaii! Let the good times roll.

      • says

        Agreed. Anytime you make something an OBSESSION and it takes valuable time away from advancing your career or family time, you have gone too far. I spend maybe an hour or two a week reading (for fun, just like reading this blog), but mostly it’s a happy machine that keeps on pumping out rewards with very little effort.

        • says

          The only way a credit card can keep pumping out rewards with little effort is if you spend money on you credit card no?

          Or is there a rewards bonus for each time milestone you hold onto it?

        • says

          Depends on the card. But mostly you just move to another card once the bonus is up. I have two cards I’ll probably hang on to because they have award multipliers in certain categories, but the rest will just be signup bonuses.

  26. Ace says

    Many interesting comments here. I didn’t realize how serious of a hobby, credit cards are for many folks.

    I just don’t know how you guys can keep track of so many cards? Yes…I know……. Excell sheets…blaa blaa.
    But let’s get real: this is a hassle!

    Anyway, good for anyone, whom is successfully obtaining rewards through this activity. But still, wouldn’t stock or real estate investment research be a more productive hobby?

      • Martin68 says

        I’ve enjoyed well over 10k$ worth of cash and free flights/hotels over the last 2 years. Easiest money I’ve ever made. The ironic thing was I used to be a 1 CC guy until BOA cancelled my Schwab 2% cashback card. They created a monster.

        • says

          Here’s the thing.. if $10,000 is the easiest money you ever made in 2 years, it might be better to make more.

          For example, let’s say you had $1 million in the S&P500 two years ago, you’re up $300,000 now doing nothing. THAT is easy money.

        • D says

          Martin and I had the same path. Schwab 2% card, happy as a clam. Once canceled two years ago, switch to AARP 5% card ($3K, cash rewards) for six months. End of six months I decide to get hotel points for when I visit my wife’s side of the family, open a Hilton Amex, found flyertalk. Since then I have applied (and gotten) 20 additional cards, redeemed a further 2K in net cash, $4K in travel (coach), and have a balance sheet with over 1.6M miles and points that I conservatively value at $19,885 (today). Just cashing in for cash and gift cards I could pull $3500 out tomorrow and that is just flex points, not miles or hotels.

          Easy, tax free money. I am 41, my net worth is $890K (excluding my miles & points), I have 22 cards in my name. My wife has two (under the CARD Act she was barred since she has no income, rule change becomes effective 10/29). I don’t pay to get my credit score but during my churning I have re-fi’d my house (Pen Fed 2.625% 5/5) and financed a car (Honda 0.9%) in addition to having 20 new cards added to my file. I am sure its in the mid 700’s, although worrying about a credit score is a fools errand if you pay your bills timely.

          I keep a spreadsheet, but I keep spreadsheets on many aspects of my like and have done so since I learned lotus 1-2-3.

    • Martin says

      You’re implying perfect market timing which is a fools game at best. If you put money in SP500 over the last 15 years, which I have done, you’re basically back at square one. I’ve been decimated twice in total stock market meltdowns. The market presently is way above the Shiller P/e and is fully valued, or overvalued by any sane metric. So the simplistic “invest in the stock market and get rich” is a myth if you’re a generation Xer like me. We’re not even getting into monetizing debt and the other last ditch efforts of our fading empire to maintain the facade of true wealth. The market is about as stable as a house built of mathcsticks. I’ve been buying rental properties after being burned one too many times in the stock market.

      @Martin68

  27. says

    My credit score isn’t high enough yet to take advantage of reward cards. I have 1 credit card I am using to build some credit, and I am slowly repairing the mistakes I have made in the past. I plan on getting a few more cards once my credit improves to take advantage of rewards.

    I don’t think I would go all out and get over 20 cards like some other commentators, but I can see why you would. I mean it’s free money if you can keep yourself under control!

      • says

        I’m not worrying about reward cards yet, just focusing on my credit. In the past I got involved in a credit card scam, didn’t pay off my first credit card, and some other issues with roommates. I am getting some of it removed from my credit report, but not without some resistance from the credit card companies, and am working on building up some good history. My accounts are all pretty new so it will just take some time.

  28. says

    Mrs. Enwealthen and I have 3 cards together:

    – the primary one we share
    – the second one is only for automatic charges (e.g. Netflix) to reduce headaches of changing card numbers on all our auto-debits when our primary card gets hacked
    – my old primary card from before the marriage that is rarely used and kept just in case.

    Anything more than that is just a distraction.

  29. says

    My mom used to have about 15 credit cards, maybe even more and she’s never been good with money. Her wallet used to look pretty ridiculous with so many cards. I finally convinced her to close almost all of them which is much easier for her to manage now. I have three cards myself and am happy not having any more.

  30. Nick says

    I don’t think this poll really proves anything.

    My interpretation: Most people just prefer to have 1-3 credit cards. If you look at the survey…most ppl with more than 3 cards still have a high NW. For example, only 1% of the ppl with 75K NW have 9 cc as opposed to 13% of ppl having 75K NW and only 1-3 cards.

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