How Many Credit Cards Should I Have?

Credit cards can be extremely useful when you need to make a purchase or you need to borrow some money. Many Americans own such a card. But is it really okay to have more than one credit card? It depends on many factors, and if you’re planning to make an additional card, maybe you should be aware of what it involves. You can read more about this below.

Is It Good or Bad to Have More than One Credit Card?

It’s hard to say for sure whether it’s good or bad to own more than one credit card. After all, it depends on your situation and how good your credit score is. You may be worried about your credit score, which is normal. But if you’re having any concerns, you should know that an additional credit card may actually be helpful for your credit score. It is useful in maintaining a low debt utilization ratio.

Your debt utilization ratio is influenced by the credit limit and the amount you charge a month to your credit card. When it comes to your credit score, if you have a high debt utilization ratio, you can expect your credit score to be affected. This may not be the most pleasant thing. Why would you be penalized for using most of your credit limit if you just have one credit card? However, you can’t really do anything about it – this is how the rules are.

According to experts, you should not use more than 30% of your available credit per card. If you manage to spread the amount in purchases across multiple cards, then you’ll be able to keep low levels of credit utilization ratio. As a result, this will be beneficial towards your credit score, because the FICO credit scoring model will consider this in the “amounts owed” part of the score. This only represents 30% of the credit score, though.

However, you should be cautious. Even if having multiple credit cards could be a good thing for increasing the total available credit, it can all go downhill, and the situation can turn bad. It can hit you and considerably lower your credit score if you open accounts you have no need for only to increase your credit score. However, if you know how to properly handle your credit, then getting multiple cards could prove to be a blessing in your case.

How Many Credit Cards Should You Have?

The amount of credit cards you should have depends on your situation. Since everyone is in a different situation compared to others, there is no set number for how many credit cards is enough. You can maybe have one credit card to use it for various benefits. Having an additional credit card will be justifiable as long as you need the extra credit lines to take care of your discretionary budget every month. It could also apply if you want to leverage the everyday spending to get some rewards in return.

How Many Is Too Many?

Even though the ideal number of cards is different from a person to another, it’s important to remember that there is such a thing as too many cards. Sometimes, you may end up creating way too many cards, and you should know how to avoid this scenario.

You have too many credit cards if you don’t want to use them all for different purposes, don’t need them, or if you find it too difficult to pay your bills. Sure, a new credit card can help with lowering the credit line utilization, but that doesn’t mean that you should start creating multiple credit cards like crazy. Doing it in a short period can be detrimental.

Because many people end up trying to play the system by creating a huge number of credit cards within a short amount of time, card issuers came up with rules to stop this from happening. This is mostly because many would sign up for new cards, and then end up canceling them after they met the spending requirements. One good example is Chase. They don’t let you apply for a new credit card if you applied for more than 5 credit cards in the past 24 months.

Also, if you have too many cards, it can make you less likely to land a good deal with a lender, because, in their eyes, you will be too risky to consider. You can even pay everything off and it may still not help – the fact that you have so many credit lines open will make you look unreliable.

For these reasons, it’s best to refrain from applying for credit cards that you don’t need or that you cannot justify based on your credit scores, reward aspirations, and ability to pay off balances.

Credit Cards and Benefits

What’s cool about credit cards is that you can earn various benefits with them. If you have multiple credit cards, you can get some rewards for each purchase made with each credit card.

For instance, one card may have a flat 1% back reward on every purchase done with it. This is the main card for purchases where higher rewards are not available. To give you an example, you may get a 5% on certain purchases if you have a Discover card, whereas the rest of the year, you could use the 1% cashback card when there’s no special bonus to take advantage of.

Regarding the 5% cashback card, it can also give you various advantages. You can get 5% back on things like hotels, groceries, gas, and many other things.

It’s still essential to make sure you don’t exaggerate with these cards, though. Otherwise, you may end up losing a card or forgetting a bill, which will ruin all of your savings.

How Does the Number of Cards Affect My Credit Score?

The way that the number of cards you own affects your credit score will help you find an answer to the question “How many credit cards should I have?”. Here is how the credit score can be affected.

Utilization

The credit utilization ratio is the amount of credit limit that you use. This is around 30% of the credit score. If you make sure to keep the balances lower than 30%, then you should be able to maximize the credit score.

When you open new cards, the credit utilization goes down, which could improve the credit score. However, when you apply for a new card, a hard credit check may be done, which could decrease the score.

Age

You need to have a properly established and stable credit history, so just having an old card is not going to make you seem trustworthy. The average age of your cards will be taken into account for your credit score.

Payment History

The payment history will amount to about 65% of your FICO score. So, you need to make sure you always pay on time if you want a good credit score, no matter what.

Conclusion

“So, how many credit cards should I have?” As you were able to see, it depends on each person. Hopefully, you will find this article helpful when making a decision on how many credit cards you should create.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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