Affiliate links for the products on this page are from partners that compensate us and terms apply to offers listed (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate credit cards to write unbiased product reviews.
- How many credit cards you should have depends on your financial and personal goals.
- Having multiple cards can come with a lot of benefits, but also added risk.
- Different types of credit cards have different uses, from building credit to collecting rewards.
- Compare the best credit cards.
Credit cards aren't just tools for borrowing; they can be instrumental in building a good credit history when used responsibly. The number of credit cards one should have will vary, and depends on one's individual financial situations, goals, and credit history.
Having multiple credit cards can affect your credit score in several ways, including your credit utilization ratio and the length of your credit history. Before you go off and apply to for five credit cards, it's important to consider managing multiple credit cards effectively to avoid the potential negative impact it could have on your financial health.
Ideal number of credit cards: is there a magic number?
There's no one-size-fits-all answer to the right number of credit cards to have. The ideal number for you depends on your financial discipline, spending habits, and credit-management skills. Start with a manageable number of cards, possibly one or two, and see how well you can handle them before you apply more. If you find yourself maxing out both cards at every turn, you shouldn't expose yourself to more risk.
Evaluate your reasons for additional cards, focusing on how they fit into your overall financial strategy rather than impulse applications for short-term rewards or financial obligations. As time goes on, make sure you're regularly reviewing your credit card accounts and assessing whether each card still serves your financial goals, or if it's time to make adjustments. The trick is balancing the rewards and risks of multiple credit cards, and making them work in your favor.
Factors that influence how many cards you should have
Your financial stability is the primary factor influencing how many credit cards you should have. Having a good credit score, paying your balances off in full every month, and earning more than you spend are all signs of a solid financial position. Having more than one credit card can be beneficial if you're in good financial standing.
However, if you're unable to manage your finances responsibly, opening more credit cards is likely a bad idea. That's because it could lead to more complexity in managing your finances, and you're more likely to face interest payments and late fees.
Impact of having multiple credit cards on your credit score
Having multiple credit cards doesn't always have a negative impact on your score. In fact, it can be quite the opposite if you manage your credit responsibly.
How credit utilization works across multiple cards
Credit utilization is a key factor in your credit score, as it measures how much of your available credit you're using. Your utilization is calculated across all accounts if you hold multiple credit cards.
For example, if you have $10,000 in total credit and a $2,000 balance, your utilization rate is 20%, which is generally favorable. You maintain a low utilization rate by spreading spending across cards and paying down balances regularly. Avoiding high balances on any card is wise, as this can negatively impact your score.
Length of credit history and multiple cards
The length of your credit history is important because it's another factor in your credit score. It's influenced by the age of your oldest account and the average age of all accounts. Opening new cards can lower this average, impacting your credit score.
If you decide to open new cards, space out applications to minimize any reduction in your credit age. Maintaining older accounts — even if rarely used — will help you keep a strong history, as they boost your average account age.
Benefits of having more than one credit card
Having several credit cards definitely has benefits. It can allow for a better credit utilization ratio, which is a key factor in calculating your credit score. Successfully managing multiple cards also shows lenders that you can handle credit responsibility, potentially leading to better loan terms in the future.
Maximizing rewards and perks
Different cards can also offer various benefits, like cash-back cards, travel rewards cards, and cards that offer purchase protection. Having more than one card allows you to have a credit card strategy that's tailored to your spending habits. Utilizing different cards for different types of purchases can also help with budgeting and tracking expenses.
Back-up for emergencies
Having more than one credit card allows you to use one line of credit for emergencies only. While having a cash emergency fund is important for your financial security, a credit card is a solid option to have if you find yourself in a bind.
Risks of having too many credit cards
If managed improperly, your cards can lead you to financial stress and negatively impact your credit score.
Risk of overspending and debt accumulation
Having more cards means more room for accumulating debt. That's because you'll have more credit available, which can lead to overspending. The only way to avoid this trap is to effectively manage your spending and be sure to pay off your balances on time and in full every month.
Difficulty managing payments across multiple accounts
If you have too many credit cards, managing your finances can be more complicated than necessary, making it harder to keep track of your spending and payments. If you're juggling multiple payment due dates, you're also more likely to face the risk of missed payments, late fees, and additional interest charges.
Tips for managing multiple credit cards effectively
Managing multiple credit cards requires organization and discipline, which will help you maximize rewards and avoid debt.
How to keep track of payment due dates and balances
Consider setting up automatic payments for at least the minimum amount due to avoid late fees. Adjusting your cards' billing dates to align with your paycheck schedule can also be helpful.
Budgeting apps and calendar reminders are also useful tools, and consolidating your card information into one spot can make it easier to manage multiple accounts.
You should also aim to pay your balance in full each month to avoid interest charges and monitor your spending to avoid overextending yourself.
Using different cards for specific purchases
Using specific cards for certain purchases can help you maximize rewards, manage spending, and track where your money goes each month.
For example, you might use a cash-back card for everyday expenses like groceries and gas, a travel rewards card for flights and hotels, and a card with a 0% introductory APR for large purchases that you plan to pay off over time.
When is it time to get a new credit card?
Signs you're ready for another credit card
Your readiness for another credit card will depend primarily on your credit health and financial stability. Are you managing the credit line or lines you already have effectively? Do you pay your bills on time and in full every month? If you've proven – to yourself and to lenders – your ability to manage your credit responsibly, you may be ready for another credit card.
How to choose the right card for your financial goals
It's important to get clear on your financial goals, which will make choosing a new credit card easier. For instance, if your goal is to earn travel rewards, consider cards that offer points or miles for purchases, along with perks like no foreign transaction fees. Maybe instead of travel perks, your goal is to save on everyday spending. Then, consider cash-back cards that reward you for groceries, gas, and dining. A card with a low credit limit and manageable fees can help establish a positive credit history for those building or repairing credit. Always compare rewards programs, interest rates, and annual fees to find a card that meets your needs.
FAQs on the right number of credit cards to have
The ideal number of credit cards will vary by individual, but generally, it's too many if you find it difficult to manage payments and you're going into debt. The right number of credit cards is one you can comfortably manage, keeping balances low and payments on time without feeling stretched financially.
Yes, opening multiple credit cards can temporarily negatively affect your credit score. Each application triggers a hard inquiry, which may lead to a slight dip in your score. Additionally, opening new accounts can lower the average age of your credit history, impacting the "length of credit history" factor in your score. However, having multiple cards can improve your credit utilization ratio by increasing your overall credit limit. If managed responsibly, opening several cards can be beneficial in the long run without causing significant harm to your credit score.
The best way to manage multiple credit cards is to stay organized. First, set up automatic payments for at least the minimum amount on each card to avoid missed payments and late fees. Paying your balances off in full every month will prevent interest from accumulating. Budgeting tools are also handy, as they can help you track payment due dates and better manage your credit.
No, you shouldn't necessarily close a credit card if you're not using it. The risk of closing a credit card account is that it may increase your credit utilization ratio and shorten your average account age, potentially lowering your credit score.
Yes, it's possible to have too few credit cards, especially if you aim to build a strong credit history. Having only one card limits your credit mix, which is a factor in your credit score. Additionally, with just one card, your credit utilization can be high if you carry a balance, potentially lowering your score. When managed responsibly, multiple cards can help you maintain a lower credit utilization rate and potentially improve your credit profile.
Having multiple credit cards can improve your credit score by lowering your credit utilization ratio and diversifying your credit mix, provided you manage them responsibly and maintain low balances.
The risk of closing a credit card account is that it may increase your credit utilization ratio and shorten your average account age, potentially lowering your credit score.
To manage multiple credit cards, set up payment reminders or automatic payments to avoid late fees, regularly monitor all accounts for fraudulent activity, and use budgeting tools to keep track of spending across cards.
Whether it's better to have a higher limit on fewer cards or more cards with lower limits depends on your ability to manage credit. A higher limit on fewer cards can simplify financial management, but more cards with lower limits might help with credit utilization and backup options.
Apply for new credit cards sparingly, considering the impact that hard inquiries have on your credit score. It's generally advised to wait at least six months between applications.
