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How many Credit Cards should You Have?
|When banks introduced Canada's first credit card, Chargex, in 1968, it was designed as a convenient tool for their most valued customers. Today's creditors have a more egalitarian approach - it seems that if you have a pulse, you can have a credit card.
But why stop at one? According to Statistics Canada, there are 3.1 credit cards in circulation for every Canadian over the age of 18 - that's 74 million cards.
According to Laurie Campbell, program manager for the Credit Counselling Service of Toronto, it's not uncommon for people to carry eight or 10 cards and a debt load of $30,000 or more. "The biggest problem we see is overspending with credit cards," she says. "There is a direct correlation between debt and the amount of credit cards you have."
Canadians charged more than $170 billion to Visa and MasterCard in 2004, compared to $39 billion in 1990, according to Statistics Canada.
"People don't see it as real money and that leads to impulse spending," says Campbell. Indeed, studies show the average person spends 112 percent more on a credit card than he would if using cash.
As a result, people are living beyond their means. As many as 50 percent of credit card users don't pay their balance each month, opting instead to carry debt and pay interest ranging from a 1.9 percent introductory rate to almost 30 percent on some retail cards.
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