How Many Credit Cards Should You Have?

Credit Cards can you best friend or your worst enemy. Some people have 40 credit cards, while others have none. But what is the correct amount that you should be carrying in your wallet or purse?

On average, people should have at least two credit cards each from a different network. (Visa, Mastercard, AMEX, Discover, etc.). However, the right answer goes much deeper than this. Ethan Dornhelm, vice president for FICO (A credit score data analytics company commonly used with lenders) stated, “Generally speaking, there is no one perfect number.”

What is the correct amount specific to you?

One factor to consider when deciding how many credit cards you should have is your credit score. Many people think that having multiple credit cards will hurt your credit score. While opening a new line of credit does temporarily affect your credit with a hard inquiry, the affects typically only lasts up to 12 months.

If you have applied for several credit applications in a relatively short time span, credit applications are not a big factor when calculating your credit scores. Overall, they make up about 10% of your FICO scores.

Furthermore, people who have long credit histories, a single or even two hard credit inquiries – has little, to no effect at all.

One thing to be careful of, people who have relatively short credit histories and few accounts, could possibly see larger change in their credit scores with just one or two hard inquiries.

When deciding how many credit cards you should have, keep in mind of where you are at in terms of your credit history. It is better to slowly build up the amount of credit cards you have and limit the amount of hard inquiries on your credit report in a short timeframe.

So, can having multiple credit cards improve your credit score?

Having multiple credit cards can actually improve your credit overall because it will make it must easier to keep your debt utilization ratio low.

For example, if you have one credit with a limit of $5,000 and charge an average of $4,400 a month to your card, your debt utilization ratio is 88%. Having a high debt utilization ratio like this will hurt your credit score. Even if you pay it off every single month, your score will still get dinged.

Now let’s say you have four credit cards all with a $5,000 credit limit. If you spend the same $4,400 every month but spread that out over all four of your credit cards, your debt utilization ratio will average around 22% on each card. This falls right in line with the 10%-30% credit utilization that most experts recommend.

It is important to keep your debt utilization ratio under control because it accounts for 30% of your credit scores. If you consistently max out your credit on a monthly basis, it could be wise to open another credit card and improve your credit utilization.

This is one benefit to having multiple credit cards, however, FICO cautions that opening new accounts, that you don’t need, just to increase you total available credit can backfire and hurt your credit score. Be mind of how many cards you are opening and consistently monitor your credit score.

Additional benefits to holding multiple credit cards

By having multiple credit cards, you are able to capture the maximum account of rewards. However, there is debate among financial experts whether chasing credit cards rewards is worth it or not. This stems from the fact that opening multiple credit cards can hurt your credit score, it is more hassle to maintain multiple cards (opening the door for missed payments), and more cards could trick you into spending more than you can afford.

For those who are financially responsible, credit card rewards can be extremely beneficial. You can use a card that has a high cash back for gas and groceries – and a second one that rewards you with travel points every time you travel or eat out.

Certain cards also have the benefit of intro offers, travel credits, free checked bags on airlines, travel and car rental insurance, and airport lounge access. These can be compelling reasons when considering signing up for a new credit card.

How many credit cards is considered too many?

The world record holder, Zheng Xiangchen, has 1562 credit cards. Obviously, this is extreme, but there is not a rule on how many cards is too many. If you spend too much, have difficulty managing payments, and don’t receive enough value from having multiple credit cards, it might be a sign that you have too many.

Moreover, you may have too many credit cards if the total annual fees for each card outweighs the benefits you get from using them. For example, say you have three cash back rewards credit cards with total annual fees of $350. If your total cash back at the end of the year is only $300 across all three cards, you are theoretically losing $50 a year.

In this situation, instead of just canceling a card, which would lower your credit utilization, it would be better to use alternative credit cards that don’t have annual fees.  

The Bottom Line

There is no right number of credit cards a person should have. This answer is truly based on the individual and the situation they are in. Yes, there are benefits to having multiple credit cards, but at the same time it can also hurt your credit score if not controlled properly.

Be sure to manage each card so that it is working for you and not against you. Know the benefits of each, know your credit limits, be aware of your debt utilization, and know your payment due dates.

Keep it simple and use each card to the best of your advantage.


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