Credit Stacking: How To Build Wealth Using Multiple Credit Cards
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Written by
Andrew Kunesh
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Edited by
Amen Oyiboke-Osifo
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Reviewed by
Jasmin Baron
Credit stacking can be a powerful way for individuals and small businesses to increase their spending power and fund new projects — sometimes even saving on interest charges. The process is relatively simple: You or your business open multiple credit cards across various banks to increase your available credit. Then, you can earn more rewards, increase your spending power and even pay less interest.
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Here, we’ll give you a closer look at credit stacking, how to do it and the risks involved. This article will focus on credit stacking for individuals — not businesses — and how you can use a credit stacking system to improve your finances.
What Is Credit Stacking?
As mentioned, credit stacking is when you open multiple credit cards in a short period to increase your rewards earning and spending power, or to consolidate debt onto cards with a promotional annual percentage rate (APR).
Applying for cards across multiple banks over a short time may make approval easier, as some banks may be more sensitive to credit inquiries than others. Applying at the same time could make it so the bank doesn’t see the other card you recently applied for.
Credit stacking is also a common practice for small businesses that need funding. A company may open multiple business credit cards to increase its spending power to fund new inventory or other business expenses. However, this takes additional considerations, as your business credit score can affect approval.
Benefits of Credit Stacking
Depending on your goals, there are several ways to use credit stacking to your advantage.
If you’re after rewards, you can open several rewards-earning credit cards to earn their welcome offers. Plus, you can take advantage of each card’s bonus earning categories like dining, travel, groceries and gas or EV charging.
Alternatively, if you need to pay down a large amount of debt, you could open multiple cards with a promotional 0% APR on balance transfers. You can then transfer your debt to these cards and save on interest by paying them off before your promotional period expires.
Likewise, if you’re funding a home improvement project or another large purchase, you could open multiple cards with an introductory 0% APR on new purchases. Then, you can split your purchases across these cards. Pay your cards off before the intro APR period ends, so you don’t pay interest charges.
Risks of Credit Stacking
Having any type of credit is risky, particularly when juggling multiple credit cards in a credit stack.
You need to take care to manage each card and ensure you make payments in full and on time to avoid late fees and interest charges, which could negate any of the benefits of credit stacking for your business.
One good way to do this is to build a spreadsheet that lists your credit cards, their balances and payment due dates. This way, you have all of your essential information in one place. You might also consider setting up autopay on your accounts so you never miss a payment.
Further, you need to take special care not to overspend when you have additional credit available to you. Only spend what you can reasonably pay off before your payment due date or before your promotional 0% APR period ends.
Credit Stacking Impact on Your Credit Score
It’s worth mentioning that credit stacking can affect your credit score — here’s how.
First, applying for multiple cards means you’ll have multiple inquiries on your credit score. These make up roughly 10% of your credit score, according to Experian, so you could see a slight drop in your credit score after applying for multiple cards.
Further, the length of your credit history also makes up 15% of your credit score, so if you don’t have established credit, multiple new accounts could lower the average age of your credit significantly. However, if you make on-time payments and otherwise use credit responsibly, other positive factors should outweigh this drop.
That said, credit stacking could help you with credit utilization. The more credit you have, the less your spending affects your credit utilization. This affects roughly 30% of your credit score.
According to Experian, those with the best credit scores keep their total utilization across all credit lines under 10%. The credit bureau also mentions that 30% or higher utilization can negatively impact your credit score. Keep this in mind when you’re credit stacking to keep your credit score high.
Using your new credit cards responsibly will help you build credit over time with on-time payments, higher credit lines and increased age of credit. Just be sure to keep utilization in check and make your payments every month to prevent any negative impact.
Bottom Line
If used responsibly, credit stacking can be a powerful way to earn more rewards and pay down debt. Just be aware of the risks before you open any number of credit cards. Access to any amount of credit can lead to increased spending, so be sure you’re responsible with your credit and pay down balances before interest or late fees add up.
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