How Many Credit Cards Should I Have? A Guide to Smart Credit Management
-
Written by
Josephine Nesbit
There’s no magic number for how many credit cards a person should have. However, the number of credit cards you have, and their credit card limits, can affect your credit score and financial health.
How Many Credit Cards Should You Have?
How many credit cards you should have depends on your needs and financial situation.
Having multiple credit cards can help boost your credit score and help you earn points, miles or cash back, but too many can complicate debt repayments.
| Number of Credit Cards | Best For |
|---|---|
| 1-2 | Beginners or those who prefer simplicity |
| 3-5 | Those who want to diversify rewards, such as cashback or travel points, take advantage of additional perks or increase their credit utilization ratio |
| More than 5 | Experienced credit card users who have excellent management skills |
Is It Good To Have Multiple Credit Cards?
Having multiple credit cards gives you extra spending power while allowing you to maximize your credit card rewards. But there are downsides and risks, including more debt and extra costs, as well.
Pros
1. Improve your credit score
Having multiple credit cards can help improve your credit score if you pay your bills in full and on time.
It also helps lower your credit utilization ratio, which is the amount of credit you’re using compared to the total amount of credit you have available.
2. Earn rewards
Rewards credit cards offer points, miles or cash back on certain spending categories. Multiple credit cards allow you to maximize these rewards.
3. Boost spending power
While credit cards have a spending limit, multiple cards give you access to more credit.
4. Convenience
Having more than one credit card can be especially helpful when shopping or traveling.
Cons
1. Risk damaging your credit score
While you can potentially boost your credit score with multiple cards, you could hurt your score if you max out your cards, miss a payment or increase your credit utilization ratio.
The major credit bureaus recommend a credit utilization ratio lower than 30%.
2. Increase your debt
There’s a risk of building debt if you overspend or don’t pay off your credit card balance in full every month.
3. Interest and fees
Having multiple credit cards can lead to accumulating interest and fees, adding to your total debt.
4. Manage multiple accounts
Managing several accounts and due dates can be tricky. You’ll need to closely monitor your accounts and make sure you make payments on time.
How Many Lines of Credit Should I Have?
A credit card is a type of line of credit. Both are revolving accounts that allow you to borrow money up to a set limit. However, not all lines of credit are credit cards.
A line of credit can offer a higher credit limit and lower interest rate than a credit card, like a home equity line of credit, personal line of credit or business line of credit. The number of lines of credit you should have for financial flexibility depends on your budget, spending habits and ability to manage multiple payments.
Credit Mix
The types of credit you have can also affect your credit score. A diverse mix of credit can make a positive impact on your score, but closing accounts in good standing can have a negative effect. According to FICO, credit mix makes up 10% of your credit score, while length of credit history makes up 15%.
What’s Considered Too Many Credit Cards?
There’s no set number that’s considered too many credit cards. If having multiple credit cards seems too complicated or causes you to miss a payment or hurt your credit score, it could mean you have too many.
Having too few credit cards, or a “thin file,” can also have an impact. A thin credit file is a credit file that doesn’t have many credit accounts, such as loans or credit cards. Having a “thicker” credit file may increase your creditworthiness and help you qualify for more credit or receive favorable interest rates.
How To Choose the Right Number of Credit Cards for You
Choosing the right number of credit cards involves evaluating your financial situation, spending habits and ability to manage credit. Here are some factors to consider:
- Choose the right mix of credit cards: Look for cards that offer rewards that fit your lifestyle, travel points, cash back and specific spending categories. Remember to compare any fees.
- Match to your spending patterns: If you spend more in certain categories, such as travel and dining, consider cards that offer higher rewards in those categories.
- Evaluate your ability to manage multiple cards: Are you disciplined with your spending and consistently pay your credit card bills on time? If yes, then you may be able to manage multiple credit cards without hurting your credit score or financials.
The Impact of Too Many Credit Cards on Your Credit Score
Having too many credit cards can negatively impact your credit score.
- Credit utilization ratio: More available credit can reduce your utilization rate and increase your score, but there’s a risk of overspending and reaching your credit limit.
- Credit inquiries: One hard inquiry has a small impact; however, multiple hard inquiries in a short period of time can lower your score.
- Missed payments: Juggling several cards increases the chances of missing payments.
How To Manage Multiple Credit Cards Successfully
You’ll need a strategy to manage multiple credit cards successfully. Follow these credit card management tips to help you keep track of your accounts:
- Track spending: Track your credit card transactions by checking your credit card statements each week. This will help you stay within your budget.
- Automate payments: Set up automatic payments so you never miss a due date.
- Avoid opening too many accounts at once: Multiple inquiries in a short period of time can hurt your credit score. Space out applications to allow your credit score to recover.
- Pay off your balance each month: Pay your balances in full each month to avoid high credit utilization and interest fees.
The Bottom Line
Evaluate your spending habits and financial situation before opening multiple lines of credit. One credit card is often recommended for beginners. It offers convenience and can help improve your credit score.
Having more than one credit card depends on whether you need an additional card to accommodate your spending habits, want to maximize rewards and take advantage of various credit card benefits and your credit card management skills.
Frequently Asked Questions
How many credit cards should I have? Here are the answers to the most frequently asked questions.
How many credit cards should I have to Improve my credit score?
Having two to three cards is usually sufficient for most people to manage their credit while earning rewards and building their credit score.
Can having too many credit cards hurt my credit?
There’s no set number of credit cards that’s considered too many. Having too many credit cards can hurt your credit score if you have high credit utilization, make late payments or open several accounts at the same time.
How can I manage multiple credit cards effectively?
You can manage multiple credit cards effectively by having a better understanding of your finances, keeping track of spending, scheduling automatic payments and paying your balance in full each month.
Is having five credit cards too many?
There’s no set limit to how many credit cards are too many. Five credit cards can be too many if you have difficulty keeping track of due dates, overspend and high credit utilization.
