8/23/21

How Many Credit Cards Should You Have?

a man looking uncertain, head in hand, with his stack of credit cards wondering how many is too many credit cards to have

Credit cards are often helpful. They can provide access to funds you need, build your credit score, and be essential in an emergency. However, in some cases, they can also result in high debt levels that can be difficult to pay off and detrimental to your credit score.

It may seem like having more than one credit card is a recipe for out-of-control credit card debt. But actually, there are many cases in which having multiple cards can be quite helpful.

So, how many credit cards should you have? Read on to learn more.

Determining how many credit cards you should have

When thinking about how many credit cards you should have, you should consider a few factors.

Your credit score and history

If you have a low credit score, it can actually help to have multiple credit cards in some situations. This is because of the way your credit score is calculated. Part of what goes into your credit score is your debt utilization ratio.

Essentially, what this boils down to is that using around 30% of your credit limit each month is the best strategy for building your credit score. Going beyond that can hurt you. And using multiple credit cards to spread your spending across can help you keep your utilization ratio low.

Keep in mind, though, that opening new lines of credit at the same time can hurt you. Having multiple new lines of credit shortens your average credit history length, which can bring your score down.

Your spending style

One of the benefits of credit cards is the rewards that they offer. Depending on the card, these range from travel rewards to simple cashback. Some cards offer excellent rewards but only on one type of purchase — gas or groceries, for example.

If you spend a lot of money on things such as travel, having multiple cards could make sense for you since you can use specific types of cards for specific types of purchases to maximize the value of your rewards.

For business owners

Opening a credit card for your business expenses can also be useful. This can help you streamline your business expenses, earn rewards, and manage your employees’ spending needs.

Financial responsibility

This is a personal factor. If you have a history of making late payments, racking up debt, and having a hard time paying it off, multiple credit cards may not be for you. Multiple cards mean multiple accounts to keep track of, with different due dates and credit limits.

Taking a moment to be introspective and consider whether you are ready for multiple credit cards can save you the headache of dealing with issues in the future.

How having multiple cards can help you

As we mentioned, having multiple cards can benefit you in many ways.

Earn varied rewards

Different cards come with different rewards. You may earn money for gas, general cash back, or travel rewards, depending on the card you use.

Have a backup

Unfortunately, credit card fraud is more common than one would hope. When a card is compromised, it’s a good idea to have a backup. This can help you stay on top of your finances until a new card can be issued.

Additionally, if you travel a lot, you may have noticed that some places you go just don’t accept particular cards, or your cards may occasionally be declined. This can be due to the fraud precautions placed on different cards. Having a few can help you ensure you never get caught without money.

Take care of emergency expenses

You may want to carry one card that is explicitly reserved for emergencies. This way, you know you always have an open line of credit.

Choosing the right credit cards

Whether you are looking for your first credit card or your fourth, you should always look for the card that’s right for you. For example, you’ll want to beware of annual fees and find cards with rewards that fit your needs.

Your credit score dictates a lot about what kind of card you can get. You’ll want to browse and compare options from a variety of places to determine what kinds of cards are available to consumers with your type of credit. A great place to start is your local bank or credit union.