How Many Credit Cards Should I Have?

Should you have more than one credit card? If you’ve ever spent your way into a massive pile of credit card debt, you probably know the answer: No!

It’s certainly true that taking out multiple credit cards can make your debt repayments unsustainable. However, there is no simple answer as to how many credit cards you should have, and there can even be advantages to having more than one credit card. Most experts agree that having multiple credit cards can either help or hinder your credit score, depending on how well you manage them.

This hasn’t stopped Americans from taking advantage of the credit cards offered to them. An Experian report from the third quarter (Q3) of 2020 shows that the average American now holds around 4 credit cards. That figure is down slightly from previous years, and it follows a pattern of U.S. consumers shedding credit card debt as the coronavirus pandemic spread financial uncertainty.

Is It Good to Have Multiple Credit Cards?

The effect on your credit score is probably one of your major concerns about having multiple credit cards. That is a common consideration, but having more than one credit card can actually help your credit score by making it easier to keep your credit utilization ratio low.

For example, if you have one credit card with a $2,000 credit limit and you charge an average of $1,800 a month to your card, then your credit utilization ratio—the amount of your available credit that you use—is 90%. Where credit scores are concerned, a high credit utilization ratio will impair your credit score. It may not seem fair—if you have just one card and pay it off in full and on time every month, then why should you be penalized for using most of your credit limit? But that’s how the credit scoring system works.

To improve your credit score, most credit experts recommend that you should avoid using more than 30% of your available credit per card at any given time. By spreading your $1,800 in purchases across several cards, it becomes much easier to keep your credit utilization ratio low. This ratio is just one of the factors that the FICO credit scoring model takes into account in the “amounts owed” component of your score, but this component makes up 30% of your credit score. Only your payment history is weighted more heavily (at 35%) in determining your credit score.

How Many Credit Cards Should You Have?

There is no magic number to that question, because everyone’s situation is different. A strong argument can be made for having at least one credit card to take advantage of the inherent convenience, security, and other benefits. Justifying having more than one credit card can depend on whether you need the extra credit lines to accommodate your monthly discretionary budget or seek to leverage your everyday spending to earn various types of rewards like cash back, points, or airline miles.

How Many Credit Cards Is Too Many?

Even having two credit cards can be one too many if you can’t afford to pay your bills, don’t need them, or don’t plan to use them for some purpose.

While getting a new credit card can sometimes improve your credit score by potentially lowering your total credit line utilization ratio, getting a lot of cards in a short period of time is not advised. Many card issuers even have rules in place to combat this phenomenon, which has arisen with customers who try to game the system by signing up for lots of credit cards to earn the bonuses and then cancel after meeting the spending requirements. For example, Chase has a policy termed 5/24, which doesn’t allow you to be approved if you have applied for more than five credit cards (regardless of the issuer) in the past 24 months.

Another potential downside of having a large number of cards is that it can make you look risky to lenders and lower your credit score. Even if you have them all paid off, the mere fact that you have a lot of open and available credit lines can make you look like a potential liability to the next lender. So, while there is no absolute number that is considered too many, it’s best to only apply for and carry the cards that you need and can justify using based on your credit score, ability to pay balances, and rewards aspirations.

Different Cards, Different Benefits

Having an array of credit cards can allow you to earn the maximum available rewards on every purchase that you make with a credit card.

For example, you might have a Discover it Cash Back card to take advantage of its rotating 5% cash-back categories so that in certain months, you can earn 5% back on purchases such as groceries, hotels, restaurants, and gas (subject to a cap of $1,500 in combined spending per quarter). You might have another card that always gives you 2% back on gas—use this card during the nine months of the year when Discover isn’t paying 5% cash back on gas.

Finally, you might have a card that offers a flat 1% back on all purchases. This card is your primary card for any purchase where a higher reward isn’t available. For example, you might be able to earn 5% on all clothing purchases in October, November, and December with your Discover card; the rest of the year, when no special bonus is available, you would use the 1% cash-back card.

Of course, you don’t want to go overboard—if you have too many accounts, it’s easy to forget a bill payment or even lose a card. The problems that can result from such oversight will quickly ruin any savings that you might have earned.

Compromised Cards

Sometimes a credit card company will freeze or cancel your card out of the blue if they detect potentially fraudulent activity or suspect that your account number might have been compromised.

In a best-case scenario, you won’t be able to use your card until you talk to the credit card company and confirm that you are, indeed, on vacation in Bermuda and your card has not been stolen. That’s not a phone call that you can make from the cash register, however, because you’ll have to provide sensitive personal information to confirm your identity. You’ll need another way to pay if you want to complete your purchase.

In a worst-case scenario, the company will issue you a new account number, and you’ll be without that card for a few days until you receive your new card in the mail. Another possibility is that you could lose a card or have one stolen. To prepare, you might want to have at least three cards: two that you carry with you and one that you store in a safe place at home. This way, you should always have at least one card that you can use.

Because of possibilities like these, it’s a good idea to have at least two or three credit cards. If you only want to have a single credit card, make sure that you’re always prepared with a backup payment method, whether cash or a debit card. These cards offer convenience and security, but are they worth it? Check the fees, if any, and be especially careful about prepaid debit cards.

Should You Carry a Credit Card for Emergencies?

It would be best if you didn’t have to use a credit card for an emergency—and instead had enough money in a liquid account, such as a savings account, to use in such a situation. However, if you are away from home while on vacation and don’t have the ready cash to cover a car repair or some other unexpected expense, then a credit card can definitely come to the rescue. Other situations, such as an unexpected medical bill or a job loss, can often drain any emergency savings. Having at least two or three credit cards can be a useful thing in times of crisis. Ideally, these cards should have no annual fee, a relatively high credit limit, and a low interest rate. However, if you turn to credit cards when you’ve lost income, exercise extreme caution so that you don’t take on unmanageable amounts of credit card debt.

The Bottom Line

There are many benefits to having multiple credit cards, but only if you manage them responsibly. To ensure that having several credit card accounts will work for you, not against you, be aware of the benefits that each card offers, your credit limit on each account, and especially your payment due dates.

Use each card to your best advantage, make sure to keep your balances low, and if possible, always pay your balances in full on or before the due dates.