How many credit cards do you really need?

How difficult can it be to help make your credit card work harder for you? Dealnews.com explores the advantages that card holders may have when they ring up purchases on plastic.

By , Guest blogger

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    Maybe you don't carry a handful of credit cards normally, but it's worth exploring how many cards you actually need. It turns out that with a little planning, you can cut down on your cards and still earn some rewards, too, according to Dealnews.com.
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Credit cards have been bad news for debtors since their inception around the turn of the century. But they're not evil! They can even be used in responsible ways to earn cardholders money. Using credit cards correctly starts with paying them off in full each month, and it's crucial to know and utilize credit card rewards. But no one wants a wallet full of unused plastic.

So the question remains: How many credit cards does the average person need? As it turns out, just two. Pare down the credit cards you carry to just a couple and you'll enjoy more rewards than ever. Here's why.

Empty Your Wallet

Consumer Reports conducted a study in August 2013 that showed using two different credit cards (as opposed to one or many) can make a huge impact on the amount of rewards dollars you earn annually. If you stick to just one trusty piece of plastic, you're potentially leaving hundreds of dollars in rewards on the table every year. Likewise, if you have more than two major credit cards in play, there's a strong chance you aren't using them appropriately.

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For instance, if you have a big family with a big grocery budget, using a 1% cash back card is foolish. If instead you were to grab the American Express Blue Cash Preferred Card, for example, you could be earning 6% back on each trip to the grocery store and 3% back on gas as you haul those kiddos around, on top of the perks of signing up — a $100 credit and a free year of Amazon Prime.

For those other purchases that don't involve groceries and fuel, the Fidelity Rewards American Express Card offers a 2% return on every purchase you make and sticks it in a retirement, brokerage, cash management, or 529 college savings account for you. It happens that the 2% flat rate is the highest flat rate card around! Plus you'll be putting aside those rewards dollars for long-term use instead of just crediting your bill. Surely 30 years later you'll be shocked at how much more you have in retirement just because you chose to use this credit card.

Alternatives to Cash Back Credit Cards

For most ordinary folks, cash back cards are the best bet. But if you do a lot of traveling, the two cards that offer the best rewards according to Consumer Reports are the Barclay Arrival World MasterCard (with double points) and the PenFed Premium Travel Rewards American Express. Keep in mind, though, that to make these cards work for you, you'll need to be spending about $3,000 per month on travel-related items every month.

The credit card rewards scene can be a difficult one to navigate. And if you have seven or eight cards, it's really easy to not use them appropriately. You might have an airline card with an annual fee that isn't paying dividends because of your lack of jet setting. You might also be using the wrong card in the wrong situation and therefore be foregoing your maximum rewards potential. That's why finding the two most valuable cards for your specific spending habits is key.

Finding the Right Credit Cards

Credit Card Tune Up is a free resource that will help you select the best credit cards for your lifestyle. It's not the prettiest website out there, but it gets the job done. Take a look at your average monthly spending and plug it into their trusty calculator to find out the credit card combo specifically catered to your spending. Keep those two handy in your wallet and take the remainder of your plastic and stick 'em in the back of a dresser drawer. You don't want to close these accounts — that could hurt your credit score — but you don't want rely on these cards if they're not best suited to your spending habits.

Joel Larsgaard is a contributor for Dealnews.com, where this article first appeared.

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