How Many Credit Cards Should You Really Have?

A credit card can be a handy tool. As long as you manage your credit carefully, credit cards can help you earn rewards while you shop, build your credit history, and have access to a credit line for purchases. Opening multiple credit card accounts may make it easier to achieve certain financial goals by increasing your available credit, as long as you use it responsibly. But if you’re not careful, juggling multiple cards might lead to overspending and debt that could become tricky to manage.

Let’s discuss finding the right number of credit cards to help you maintain a healthy financial picture.

Is it good to have multiple credit cards?

Whether or not it’s a good idea to have multiple credit cards depends on your personal circumstances.

Managing multiple credit cards responsibly may help your credit score by improving your credit utilization ratio, the total portion of your available credit in use at a given time. The lower your credit utilization ratio, the better for your credit score.¹

Each time you open a credit card account, your total available credit limit increases by the amount the card allows you to borrow (the maximum amount you can charge to the card).² By increasing your available credit, you may decrease your credit utilization ratio.

For example, say you have one credit card with a $1,000 credit limit. A $500 balance on that credit card would make your credit utilization ratio 50%, which could impact your credit score. But if you were to add another credit card to the mix with a $2,000 limit and keep its balance at $0, your overall available credit would increase to $3,000, bringing your credit utilization down to about 17%. Increasing your available credit may not be as impactful to your credit score if you tend to repay your balance in full each month.

You may also consider opening multiple credit card accounts to access different rewards perks or programs. If your current credit card offers cashback on groceries, for example, you might want another card that rewards restaurant purchases or flights. To make the most of your rewards, try to avoid rolling your balance over from month to month. That way, interest charges won’t offset your earnings. Rewards cards may also charge annual fees. In that case, make sure the benefits you collect are worth the additional cost.

How many credit cards are too many?

Generally, if you struggle to stay on top of your credit card usage across your open accounts, you may have too many credit cards. The benefits of carrying multiple credit cards don’t always outweigh the risks. Although it may be tempting to accept every offer that lands in your inbox, sometimes less is more.

As a rule of thumb, if another card won’t improve your financial situation, it may not be a good fit. These questions may help you determine whether applying for an additional credit card might make sense for you:

-Can you keep track of your due dates?
Every new card will come with a new payment date. Making a payment late because you’ve mixed up the dates could hurt your credit score and increase your debt through late fees and interest charges.

• Do your cards have annual fees?
  You may not want to pay multiple fees each year just to keep your credit cards active.

• What’s the interest rate?
  Carrying multiple high-interest credit card balances may leave you with credit card debt that’s difficult to pay off.

• Will having multiple credit cards tempt you to overspend?
  Even with more available credit, overspending may hurt your credit score and lead to a difficult financial situation.

How many credit cards should I have?

The average number of credit cards per person in the United States is about four, according to Experian.³ But that doesn’t mean you should have four credit cards. To find the right fit, consider your situation.

If you’ve recently opened your first credit card account or you’re working to rebuild your credit, you may want to stick to one card. That way, you can build healthy credit habits and learn which card features add value to your financial life.

On the other hand, maybe you’ve had one or two credit cards for a long time and have paid your full balance each month. You might consider looking for another card with rewards that reflect your spending habits. An additional card may also give you a little more spending power — just be sure not to exceed your budget.

Some retailers may offer credit cards that unlock benefits at their stores. If you frequently shop at one of those retailers, you may consider applying for a store credit card so you can access exclusive perks.

Some store cards work like standard credit cards, allowing you to carry a balance from month to month, but others are charge cards.

Charge cards require you to pay off your balance in full each month, so it’s important to check the terms before signing up. If a store clerk offers you one at checkout, don’t feel pressured to decide on the spot. Take time to read the fine print to make sure the charge card is the right fit for you.

Each time you apply for a new credit account, the lender typically completes a hard credit inquiry — that means they pull your credit report to review your creditworthiness. Too many hard inquiries in a short timeframe may hurt your credit score. So it’s usually wise to avoid applying for multiple credit cards at the same time.

Responsible credit card use is key

Before you apply for a new credit card, consider whether it improves your financial future and adds value to your life. Credit cards can be valuable tools if you manage them responsibly by keeping your balances low, paying your bills on time each month and monitoring your spending. If a new card will be difficult to use responsibly, it’s probably not the best time to open an account. Always be realistic about the benefits and risks before committing.

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Sources:

1. https://finred.usalearning.gov/Money/InOutCredit
   
2. https://www.experian.com/blogs/ask-experian/what-is-a-credit-limit/
   
3. https://www.experian.com/blogs/ask-experian/average-number-of-credit-cards-a-person-has/
   
4. https://www.consumerfinance.gov/ask-cfpb/when-will-a-lender-run-a-credit-check-or-obtain-a-copy-of-my-credit-report-en-322/
   
   This article has been updated since 2022. Skyelar Kavanagh and Kim Gallagher contributed to this article.