How many credit cards should I have?
Maybe you already have one or two credit cards and are wondering if you should get one more. Or maybe you already have a handful of credit cards and wonder if you have one too many.
If this is a question you’ve asked yourself time and time again, the truth is that there isn’t a perfect answer. According to the Experian 2020 Consumer Credit Review, the average American has four credit cards.
Whether that seems like too little or too many, it is important to ask yourself some key questions to determine how many credit cards you should have.
To answer these questions, I’ve turned to experts and consumers alike, allowing you to make a more educated decision about whether you should add another credit card to your wallet.
When it comes to credit cards, there are a lot of options available to you. You’ve got your rewards cards, retail cards, business cards, student cards, balance transfer cards, and cards specifically designed for building/rebuilding your credit, to name a few.
Knowing what types of credit cards are available is key to strategizing how you would use specific cards in order to build your credit and/or maximize rewards.
Based on reviews left by credit card consumers on BestCompany.com*, the following types of credit cards were mentioned most often, suggesting that they are a popular choice among consumers:
These findings are consistent with other surveys and statistics, reporting that 60 percent of Americans have a cash back card. Retail credit cards are also a popular choice, with 40 percent of Americans owning one; according to customer reviews, the most popular retail cards include those for Costco, Amazon, Best Buy, and Walmart.
In reviews, 8 percent of customers also mentioned how they liked that their credit card was accepted everywhere, even internationally. The majority of these reviews were speaking about Visa credit cards, but this suggests that having a widely accepted card is important to consumers, particularly when traveling.
Based on combined data, we would recommend you have these credit cards in your wallet:
Of course, the types of cards that you should carry will depend on your specific needs. If you aren’t faithful to a particular retailer, then a retail card would not make sense for you, and if you don’t travel frequently then you may not have to worry so much about your cards’ acceptance in foreign places.
*Review data is taken from a sample of 400 credit card customer reviews.
Technically, you can apply for a credit card as frequently as you’d like. But, it is important to keep in mind that this could be a red flag to credit card issuers if they see that you have recently applied for multiple credit cards.
Expanding on this point, Andrew Schrage, CEO and cofounder of Money Crashers says, “[Credit card issuers] see a high application rate as a sign the consumer is overextended or could be soon.”
Yes, your credit score will likely be affected by applying for multiple credit cards, especially if done all at one time or in close succession to one another.
“This is one of several factors that can affect your FICO and VantageScore credit scores, although it’s not as influential as your payment history or credit utilization,” says Schrage. “The effect also doesn’t last as long as some other adverse credit events, such as delinquencies — a year or two, compared with seven or more. But this is one more reason not to apply for every credit card that catches your eye.”
It is important to note that when you apply for a credit card, generally your credit score may temporarily drop. This isn’t necessarily something to worry about, but it may make it more difficult to be approved for another credit card at that time, or for any other type of loan.
While there are many factors to consider when applying for additional credit cards, one important thing to consider is whether the cards you are applying for have an annual fee. Many cards do not, but if you are planning on opening multiple credit accounts, it would be wise to weigh this fee, especially if more than one of your cards has one.
If you are committed to being responsible with your cards and keeping track of what each is used for, having multiple credit cards can be a great way to maximize rewards, save more money, and improve your credit score.
Here are some specific benefits of having multiple credit cards:
Multiple credit cards can ensure that you’ll never be left awkwardly standing at the till when your card isn’t accepted. Although the majority of credit cards are accepted at most retail locations, it can be helpful to have a mix of credit cards in case one is declined.
In addition, multiple cards can help when you run into large or unexpected expenses as you’ll be able to split costs across multiple cards, saving you from eating up or exceeding your credit limit on just one card. This allows you to keep your credit utilization rate low, which can have a more positive impact on your credit overall.
However, you should be careful in how you're splitting costs on multiple cards. It is not advised to max out one card and then out the overflow on another, as this could still increase your overall credit utilization. So, you might want to try to split costs in a way that will keep your balance low on each card, of possible.
Generally, your credit score is calculated on a handful of important factors. Your FICO score, perhaps the most common credit score used and referenced in the industry, is calculated based on these factors:
Amounts owed is a broad category that includes your credit utilization ratio, which is an important factor that can speak to the benefit of having multiple credit cards.
Nathan Grant, Senior Credit Industry Analyst at Credit Card Insider explains: “When used responsibly, a new credit card can help you improve your credit scores over time. More credit cards means more available credit, which makes it easier to keep your credit utilization low.”
It is important to be mindful of your credit card utilization, since a lower rate shows lenders that you’re using less of your available credit, which can be an indicator to lenders that you aren’t overspending and are doing a good job of managing your credit. This can be harder to do if you have just one credit card, as it is much easier to spend up to your credit limit on one card. Instead, splitting spending across multiple cards keeps your utilization rate low on all cards, which lenders will see as responsible use on multiple credit cards.
Similar to monitoring your credit utilization ratio, having multiple credit cards increases your available credit. This can be helpful if you feel you may need a higher credit limit than what you get with one credit card while also helping you manage your credit utilization.
Credit cards often come with some sort of rewards or points that can make it more worthwhile to use. Based on your lifestyle and needs this can be beneficial, as it can help you save more money on travel or earn more in cash back, for example.
It is important to assess your spending habits and see where a specific rewards card could prove to be most worthwhile.
Multiple credit cards means that you have multiple credit lines to keep track of, which can be challenging and potentially lead to missed payments, which will only hurt you in the long run.
Here are some specific drawbacks of having multiple credit cards:
This may seem self-explanatory but the more cards that you have, the more difficult it could be to keep track of them all.
“If you have too many cards, you could lose track of which ones should be used for which types of spending and struggle making your payments,” Grant says. “ If used irresponsibly, you could not only get caught up in a quicksand of debt, but can severely damage your credit scores. Even a single late payment can remain on your credit reports for up to seven years.”
Just like how having more cards could make it difficult to keep track of them all, more credit means it would be much easier to carry multiple balances, which could be more costly to you in the long run. Carrying a balance may not only increase your credit utilization ratio, but it could also result in you getting hit with interest.
It is encouraged to pay off each credit card balance in full each month. If this seems like something that you may not be able to manage easily, or if you run the risk of using more credit than you can pay back, then it would be wise to carefully assess whether or not you should get another credit card.
If you spend up to your credit limit on one or multiple cards, or even spend more than you can reasonably afford, you run the risk of falling into high-interest credit card debt, as you will be charged daily accruing interest each month, for what you aren’t able to pay off. Don’t let this scare you if having multiple credit cards makes sense according to your circumstances, but always seek to be mindful and responsible in your spending to avoid debt later on.
“Every time you apply for a new credit card a hard inquiry will lower your credit score a bit, so don’t apply for many cards in a short period of time, especially if you don’t know whether you have good odds of approval,” says Grant.
If you are applying for multiple cards all at once, this is important to keep in mind, as your credit score could take a hit, making it more difficult to be approved for other credit cards. Thus, it would be advisable to plan out which cards you wish to apply for and when, accounting for a dip in your credit score upon applying for a new card.
After all that, here we are, back where we began, attempting to answer the big question of how many credit cards you should have.
Even after considering rewards, credit utilization ratios, and FICO scores, it all comes down to your needs and how you’ll use your credit cards versus the number of cards you can fit in your wallet. Carefully consider your financial situation, needs, and spending habits before jumping into applying for more cards.