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How Many Credit Cards Should I Have?

In Money Management
A woman looking at her many balances online wonders, "How many credit cards are too many?"

How Many Credit Cards Should I Have?

It’s hard to beat the ease of use and convenience of credit cards, but is it good to have multiple cards?

Used wisely, credit cards can save you time and money and can help you build a pathway to long-term financial stability. However, credit cards are also a tempting source of easy credit that can quickly overwhelm you with high-interest debt.

So, how many credit cards should you have? Below, we take a look at whether there is a “right” number of cards you should own, the pros and cons of having multiple cards, and how to choose the right kind of card for your lifestyle.

Full Deck: What’s the Right Number of Credit Cards?

Despite what some banks or card issuers might tell you, there is no magical “right” number of cards that everyone should aim for to gain maximum financial benefits. Your financial needs and habits are unique, so the right number of cards for you might be very different from someone else’s.

You need to have the right number of cards to allow you to pay for everyday costs and larger expenses while not being overwhelmed by out-of-control debt, late fees, or other charges.

To build creditworthiness, however, it is very important to open and maintain enough active credit accounts to allow you to demonstrate your ability to borrow and repay money responsibly over time. Doing this will ensure your credit score improves consistently.

How much credit is right? Many experts recommend aiming for at least five credit accounts at any one time. Equifax, one of the big three credit bureaus, recommends that at least three of these accounts be actual credit cards.

Remember, however, that this is a personal choice. Your credit record will not benefit if you open credit accounts or apply for cards you cannot afford to maintain or are not organized enough to pay off on time. Aim for the number of cards that you can manage and use wisely.

How Many Credit Cards Are Too Many?

What does owning too many credit cards look like? In many cases, you might have taken on too many credit cards if:

  • You are forgetting due dates on one or more cards
  • You are making only minimum payments on one or more cards
  • You need to borrow more money on one card to pay another

Failing to take timely action to deal with mounting credit card balances or missed payments can quickly lead to out-of-control debt and long-term damage to your credit balance.

Remember, also, that even if you are able to maintain and pay down balances on multiple cards, every new application for a card triggers a “hard inquiry” on your credit report that lowers your score slightly.

Too many hard inquiries can affect your credit score over time and could be a red flag for other lenders, suggesting that you’re desperate for credit or planning to take on a lot of debt.

How Often Should You Apply for a Credit Card?

While the hard inquiries generated by a card application usually lower your credit score by 10-15 points, every card you open effectively lowers the average “age” of your credit history, which can result in a longer-term impact on your score.

With this in mind, what is the best way to space out applications for credit cards?

According to credit bureau Experian, hard inquiries stay on your credit record for about two years. Most experts suggest spacing out inquiries by at least six months to spread out the impact while continuing to manage your existing accounts responsibly to rebuild your score.

Multiple applications within a two-week period are usually treated as a single hard inquiry, so they will not affect your credit score directly, but opening several credit cards simultaneously will affect your credit age and raise concerns for anyone reviewing your actual credit record.

What Are the Challenges of Multiple Credit Cards?

That said, applying for new cards remains very easy to do. The real challenge lies in effectively managing several cards at the same time. Here’s why:

Multiple Balances

Keeping track of multiple balances across different cards can be tricky unless you are very organized and disciplined. Each extra card means another source of credit to track.

You also need to decide how much you will pay on each card every month to avoid interest charges. Ideally, you should be paying off every card every cycle, but this is not always possible, especially if you’ve used the card for a large purchase.

Outstanding balances will cost you more over time, and while it can be tempting to make only minimum payments on one card while you pay down another, this can end up costing you more in the long run.

Multiple Due Dates

Along with managing balances, you need to make sure payments on all your cards are made by the due date. Late payments will often result in late fees. They’re also the single biggest component in determining your credit score, affecting your long-term creditworthiness.

Some people find it helpful to have the due dates on all their cards coincide and timed to be close to their payday, so they’ll be certain to have money on hand.

Others choose to automate payment of one or more credit cards to ensure they all get paid on time. However, you’ll need to set things up to make either a full or minimum payment on each card and be able to have enough money on hand to cover payments on all your cards.

Multiple Annual Fees

Cards with the best interest rates or perks often have annual or even monthly fees. Having multiple credit cards involves not only tracking your balances on each one but also making sure you can pay the annual fee or other charges on each card on time.

Failing to pay these fees might lead to your card being suspended or having a missed payment recorded on your credit report.

Will Having Many Cards Impact My Credit Score?

In addition to affecting your monthly finances, owning and using several cards influences your credit score in a variety of ways.

Credit Utilization

Your credit utilization ratio is the amount of your available credit that you are using. Lenders want to see borrowers using credit but generally like to see utilization ratios below 30%.

Having multiple cards can actually help you maintain a lower credit utilization ratio—as long as you manage your spending wisely across all cards.

Payment History

Your payment history accounts for about 35% of your credit score. Timely payments steadily boost your score, while late payments weigh heavily on it.

With multiple cards, you’ll always have more payments to manage, making it more likely you will miss a payment, which will then have an immediate and lasting negative effect on your credit score.

Average Age

The average length of your credit history usually accounts for about 15% of your credit score. Older accounts help raise your score, while opening new accounts can shorten your average account age, potentially lowering your overall score.

That means having multiple older, well-managed credit accounts can benefit your credit score, but opening new accounts too frequently can have the opposite effect.

How Do I Choose the Right Type of Card?

While the number of cards you choose to own is important, the type of cards you choose will also affect your ability to manage multiple cards and therefore can also affect your overall financial health.

Rewards Cards

Rewards cards offer points, miles, or other incentives for your spending, making them a tempting addition to your wallet.

However, rewards cards typically have higher interest rates and are more likely to come with annual fees. While you might benefit from some valuable perks, rewards cards can also end up costing you more than you might be saving on another lower-interest card.

Cash-Back Cards

Cash-back cards that give back a percentage of what you spend are often enticing. However, many cards only offer rewards on certain categories of spending, so you need to pay attention in order to maximize your cash-back returns. You might find it’s cheaper to do your shopping on a single lower-rate card rather than paying more for a cash-back card.

Lower Interest Cards

Choosing a card with a lower APR is usually a good choice and important to have if you plan to carry significant balances from month to month.

However, be sure to look at the total cost of owning the card, including any annual fees or excessive late charges. Also, make sure the card is not skimping on important security features or other rewards and benefits you might enjoy on a slightly higher-interest card.

Ready to Simplify? Consider a Balance Transfer Card

Having a wallet full of credit cards can feel good, but it can also quickly become a burden if you’re unable to make payments on time or keep your balances in check.

If you’re ready to simplify your credit card selection or want to get to grips with mounting credit card debt, you can use a balance transfer card to consolidate what you owe. You’ll have fewer cards to worry about, and you’ll often pay less interest.

At 1st Advantage Federal Credit Union, we offer our members quality credit card products designed to meet their specific needs. Our 1st Advantage Standard Mastercard offers no annual fee as well as no fee on balance transfers—making it an ideal way to simplify your financial life.

Contact us today to find out more or click below to learn about how to consolidate your credit card debt by transferring balances to a new card.

How to Do a Balance Transfer in 6 Steps