Every so often I go to the Yahoo Personal Finance section where people submit questions, and regular readers (read, not financial professionals) submit answers. The best answer, as voted, is shown to the unassuming public. Is this advice actually good?
Here is a question I saw the other day on Yahoo Personal Finance Questions and Answers. (They change these links every so often, so I copied the Q&A below).
Q: Which is better: fewer credit cards with high balances or more cards with low balances?
A: Best Answer: I am going through the same issues. My banker explained that it would be better to have fewer maxed out cards as opposed to having a bunch with a balance. Credit card companies look at you as a possible liability if you have unused credit card balances. You have the “ability” to max all of them. I hope this makes sense.
*Disclaimer, I am not a financial expert, so I am not qualified to give financial advice on this matter. But neither is the person who gave the advice!
How good is the answer? I don’t like this answer at all! I have no problem with the advice of having fewer cards with higher limits. The amount of available credit can hurt your credit score because there is more available credit to use, which is a factor in determining credit risk. If the entire limit is maxed out it doesn’t matter how many cards you have, your credit score will suffer as a result. In my opinion, the answer is extremely basic and does nothing to address other very important issues such as interest rates, paying more than the minimum amount, balance transfers, rewards benefits, or even carrying a credit card balance!
The question is stated so that credit card debt seems normal, and being smart and proactive with your debt means having fewer credit accounts with larger limits. That won’t magically pay them off faster (although it might be a lot easier to keep track of them). The point I make is that most personal finance questions are too complicated to be summed up in two or three sentences.
I really hope the person who asked the question looked deeper into her finances than just the answer given on Yahoo. I have not written a post or series about how to tackle credit card debt, but there are many personal finance bloggers who have dealt with debt and have written extensively on it (see No Credit Needed and Blogging Away Debt for two bloggers who have made great headway on their debts. For 2 new bloggers who are sharing their experiences about slaying their current debts, see Dollar Buy Dollar and SingleGuyMoney.)
If anyone has a good post (or a series) dealing with credit card debt, I will gladly link to it here.
I will not say Yahoo Personal Finance Questions and Answers should be avoided; by necessity they have to be quick and to the point. I am sure there is also a screening group that ensures the advice is at least fairly accurate. As with many things, personal finance issues can be very complex, and I recommend doing your research in a number of places before making any major financial decision. You owe it to yourself. (pun intended. 
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{ 5 comments… read them below or add one }
It’s kind of funny that you should post on this. As I was going through a couple of the “Yahoo Financial Experts” I saw an Ad that included the exact same question. I was almost disgusted that their banker (pronounced: sales rep) would recommend such a thing. It makes the answer look almost acceptable that the ‘banker’ recommended this.
I didn’t find the original question to read all the answers, but shouldn’t the ‘banker’ be looking out for the person and be recommending not carrying a balance?
I suppose that would be against bank policy, we don’t want just every Dick and Jane walking around financially stable, that would not be profitable.
Traciatim, great comment!
Unfortunately, Yahoo rotates these Q&As so it will be hard to find the original Q&A and the other answers. Some of the responses were much worse.
I agree, the term ‘banker’ lends credibility to the response. (Notice the person did not refer to their personal financial advisor, who would have recommended not carrying a balance!)
Well, I must confess that I don’t like Yahoo Personal Finance Q&A much. Mostly the answers are not moderated the way they should be. Yahoo Q&A seem to be really quick and easy but I guess, people who don’t know much about this or that financial issue can be easily confused with such answers.
July Bucks,
I agree. It’s unfortunate, because sometimes the answers can not only be incorrect, but they may also give harmful advice. The “community is supposed to police this, but I don’t think enough people stick around long enough to do that. So the answer that “sounds the best” gets voted up, whether or not it is the most correct answer.
That’s true. The thing is, such situation seems to be okay in categories like entertainment where people reveal their thoughts and ideas, but not in business and finance.
Anyway the idea of the service is great, sometimes it really helps finding quick answers which don’t need any proofs