Credit Cards, the free gift effect

We walk by those "Enroll now and get a free gift" credit card tables all the time. Have you given any thought to...  If I have all those department store cards, how does that affect me? Does this "potential" debt capacity matter? What if I never use them? I just signed up to get the free Hockey Jersey or other "Free Gift".

The question back to you or I is, are you using them? Are you carrying a balance? At the end of the day it all adds up. If you are carrying multiple balances and multiple minimum payments this can affect your mortgage application.

My advice would be get rid of all the little cards and just keep the necessity ones.

How many credit cards are too many?
This is a tough question to answer, because there is no magic number of cards one should have or use. A good rule of thumb is to keep it between two and six cards. Having multiple cards can help you keep your credit score at a higher number. For example if you are looking a purchasing new furniture, and the cost for the furniture is $2000. If you have 2 credit cards with a credit limit of $2000, you are better off splitting the cost onto the 2 cards to keep the balance from getting close to the limit. Having the balance below 60% of your credit limit will help keep your score strong.

If I have a Sears, Bay, Wal-Mart, Home Depot, Peoples, Esso, and Petro Canada Cards am I a higher credit risk because I have these cards?
Having multiple department store cards does not necessarily put you in a higher credit risk category. If all of these are cards that were applied for at one time and it was in the last year, chances are You credit score took a bit of a hit. Having new credit cards reporting on your credit bureau can lower your score, as your score is calculated based on payments made over time. If you have a new department store card that has only been open for 2 months you will not have a repayment history with that credit company yet.

One thing to watch with department store cards is make sure your payments have been made on time, every time. I have seen so many instances where a company will put a late payment on your credit report for paying 1 day late. This could be the payment was made with internet banking on the due date but the payment took a couple days to get to the credit company. Obviously, late payments are not what you want on your credit report.

What If I filled out the application for the "Free Gift" but never used them?
Free gifts are nice but be careful when you do this. Applying for department store cards can take up to 20 points off your credit score. If you have credit cards on your report that are not being used, you are not showing a repayment history, which could hold back your credit score a bit.

So, is that free Calgary Flames T-shirt worth it?

Thanks again to Scott Bourke at Regional Mortgage for assisting in answering. You can reach Scott at Regional Mortgage in Red Deer 1- 866-343-1125 or online at

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Patrick Galesloot

Patrick Galesloot

Patrick Galesloot

CENTURY 21 Advantage
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