How Many Credit Cards Should You Have?

Should you own multiple credit cards? You may respond “yes” if you have ever racked up a sizable credit card debt as a result of reckless spending.

Getting several credit cards can undoubtedly make your debt obligations unmanageable. The number of credit cards you should have is not an easy question to answer, and in some cases, having more than one credit card can be beneficial. According to the majority of experts, depending on how effectively you handle them, having several credit cards can either help or hurt your credit score.

Is Having Multiple Credit Cards a Good Idea?

If you use rewards cards, having numerous credit cards may provide you greater purchasing power and opportunities to accumulate miles, points, or cash back. But one of your main worries about having several credit cards is undoubtedly how it will affect your credit score. That is a typical concern, but by making it simpler to maintain a low credit use ratio, having multiple credit cards can actually improve your credit score.

Your credit usage ratio—the percentage of available credit that you use—is 90%, for instance, if you have one credit card with a $2,000 credit limit and you charge an average of $1,800 each month to it. A high credit utilization ratio will harm your credit score when it comes to credit ratings.

It might not seem fair—why should you be penalized for utilizing the majority of your credit limit if you just have one card and pay it off in full and on time each month? However, it is how the credit scoring model operates.

Most credit experts advise against utilizing more than 30% of each card’s available credit at once in order to raise your credit score.
Spreading out your $1,800 in expenditures over numerous cards makes it much simpler to maintain a low credit use percentage.

The “amounts owed” component of your score, which accounts for 30% of your credit score, includes this ratio among other factors in the FICO credit scoring model. Only your payment history (with a weight of 35%) is weighted more heavily when calculating your credit score.

The ideal number of credit cards to have is?

There isn’t a universal answer to that query because every person’s circumstances are unique. To benefit from the ease, security, and other advantages of having at least one credit card, a compelling case can be made. Whether you need the extra credit lines to cover your monthly discretionary budget or want to use your everyday spending to earn different kinds of rewards like cash back, points, or airline miles will determine whether holding multiple credit cards is justified.

Effects of Having Too Many Credit Cards

Even two credit cards may be too many if you are unable to pay your payments on time, don’t need them, or don’t intend to use them.

While obtaining a new credit card occasionally raises your credit score by maybe lowering your overall credit line utilization ratio, acquiring numerous cards quickly is not recommended. Rules have also been put in place by several card issuers to address this issue, which has emerged as a result of customers who try to game the system by opening a lot of credit cards to collect bonuses, then canceling their cards after they have met the spending requirements. For instance, Chase has a rule known as 5/24 that prohibits approval if you have applied for more than five credit cards (regardless of issuer) in the previous 24 months.

Multiple credit cards can result in fees and interest charges that build up in various areas. Other cards may have introductory rates that are teaser rates for a few months before going up dramatically. Premium cards frequently feature annual membership fees. Even with relatively minor balances, keeping track of everything can be challenging.

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