How Many Credit Cards Should I Have?

Best Number of Credit Cards — Photo Credit: mhowardbooks

There are so many different kinds of credit cards available right now it’s nuts. There are credit cards for people with bad credit. There are credit cards that offer a percentage cash back for each dollar you charge to them. Other cards that lets you rack up airline miles towards free travel. Your favorite hotel chain has a credit card to earn points toward free nights stay at their properties. When you are checking out at Target the cashier asks if you are interested in signing up for their store-branded credit card.

If you signed up for all the credit cards available, you’d need a backpack to carry them all around. The current Guinness record holder as of 2019 is a guy in China who has 1,562 credit cards that took him six years to amass.

This brings up a couple questions most people have. How many credit cards should I have? How many credit cards are too many? There is no right or wrong answer to the first question. I would say 1,562 cards are too many.

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How Many Credit Cards Should You Own?

Ask Dave Ramsey and he will say you should not have a single credit card in your wallet. None. As in a big fat zero. He uses a debit card and that’s what works for him. He is partially right though. Someone who has zero financial discipline and cannot use credit responsibly should not have a credit card. But someone who is financially savvy and regularly pays off his or her balance in full will be much better using a credit card over a debit card.

The average number of credit cards Americans own is between two and four. Experian found in their 2017 State of Credit report the average American has 3.1 credit cards. TransUnion reported the average number of credit cards per person was 2.69 as of the first quarter of 2017. Credit Karma members as a whole had 4.73 credit cards.

I have a total of four – three personal cards comprised of an American Express card, one Capital One Visa card, a Citi Mastercard, and another American Express for business. All these cards except for the personal AmEx are cashback rewards cards because I feel if I was going to use credit cards to pay for products and services anyways, I might as well earn something back for using them. In the two-plus decades I’ve had credit I have never paid a cent in interest but have earned thousands back in cash rewards.

How Many Credit Cards Should You Carry?

There is a difference between having a credit card and actually carrying it in your wallet.

I know a guy who had a wallet that was almost three inches thick when folded and needed a rubber band to keep it closed. With a wallet that big you are going to need a heavy-duty belt to keep your pants from falling down.

You do not need to carry around all the credit cards you own. You should only carry the ones that earn you the most rewards in your day-to-day life. This may be one general all-purpose rewards card and specific bonus category cards for your most frequent purchases.

According to Experian’s State of Credit report, most Americans own 2.5 retail cards out of their 3.1 credit cards. Unless you are going to Target or Kohls, and their store cards offer more rewards points or cashback than a traditional credit card, you should leave those cards at home. Same with your travel cards. You don’t want to get your wallet or purse stolen and have to go tracking down the customer service numbers to get them canceled.

If you are worried about a card getting declined when you get to the checkout or in the rare instance one of the credit networks has technical problems like Visa did in Europe in 2018, then you should carry two cards. These two cards should be from different issuers. For example, a Citi card with the Mastercard logo and a Chase credit card from Visa.

Usually, Mastercard and Visa are accepted almost everywhere. Discover and American Express acceptance is more limited. Occasionally you do run into a merchant such as Costco that only takes one type of card.

I tend to live on the edge and usually carry just one card, my Capital One card that earns me the most cashback percentage. I did add my Citi card into my wallet this quarter because they are offering 5% cashback on groceries as their rotating category bonus. In case my primary card has problems, I always carry some extra cash in my wallet.

Reasons To Have Multiple Credit Cards

Once you have two credit cards, one as primary and one as a backup, is there any point to sign up for additional cards? For people who never carry a balance, there is no harm in having multiple credit cards. It can even be beneficial.

Optimize Your Card Benefits and Rewards

Think of credit cards as being like shoes. You can do fine with one pair of sneakers for most situations. For certain situations, you will be more comfortable having shoes that fit the occasion. You might have a pair of dress shoes or heels for formal settings; a pair of trainers for exercising; hiking boots for trekking through the woods; climbing shoes for the climbing gym.

To make sure you are getting the most from your cardholder benefits, you will use the card that best fits the occasion, just like you’d do with shoes.

You might use your cash-back rewards card for general situations that don’t fit any other. Then you might have a travel rewards card that you use when you stay at hotels or rent cars that earns you more points for discounts on future travel, free airport lounge access, or provides trip cancellation or free rental car insurance coverage.

You might want a store card for better discounts than what you’d get from your regular cash-back card when shopping at that particular store. A store or category-specific credit card might offer 5% cash back for grocery or gasoline purchases versus maybe 2% with your regular card.

Another card might offer extended warranties and purchase protection that you can take advantage of when buying expensive items like TVs, computers, digital cameras, or appliances.

If you shop online often you might choose to use a card that lets you generate temporary one-time use credit card numbers that are useless if a hacker happens to steal your card number from the merchant.

Take Advantage of Signup Bonuses

Many credit card issuers offer lucrative welcome bonuses to entice people to apply for new cards and spend a certain amount during the introductory period. These bonuses could be worth hundreds of dollars in cold hard cash or even hundreds of thousands of points that could be redeemed for free flights or hotel stays.

Crafty customers have figured out since they are already using their cards for everyday purchases and expenses, they might as well get rewarded for it by scoring these new customer signup bonuses. In a practice called credit card churning, they would repeatedly open new credit cards to earn welcome bonuses and rack up the rewards.

Boost Your Credit Score

FICO found that cardholders with a credit score over 800 had an average of three open cards.

Of the five factors that are used to calculate your credit score, after paying your bills on time, the next biggest consideration is your credit/debt utilization ratio. The total amount of debt owed out of your total credit limit makes up 30% of your score.

Every new credit card that you get approved for will naturally increase your total amount of credit available. This lowers your credit utilization ratio, making you look better in the eyes of lenders. Lenders want to see people who can handle debt responsibly. This is only true though as long as you don’t run up your new credit cards because of the additional credit.

Personal finance experts will tell you to keep your credit utilization ratio under 30%. If you are trying to get into the 800 credit score club, you will want to shoot for having a utilization ratio of 9% or less.

Someone with a balance of $1,000 they are paying down on a credit card with a $3,000 limit has a ratio of 33% ($1,000 divided by $3,000). Getting approved for a second credit card with a new credit line of $4,000 will immediately drop your debt-to-credit ratio to 14% ($1,000/$7,000).

However, you can get the same effect by calling up your existing credit card issuers and asking for a credit line increase.

Besides the utilization ratio, having several credit cards increases the total number of credit accounts on your credit file. This factor only makes up 10% of your total credit score, but someone jonesing for that mythical perfect 850 score will benefit from having 21+ credit lines (open or closed) according to Credit Karma.

Potential Problems With Having A Lot of Credit Cards

It might seem like you should go and get additional credit cards with all the perks and benefits that come with them. Like most things in life, whether it be cookies or chocolate, a few may be good, but too many is not. This is true with credit cards too.

More Credit Cards Mean More Maintenance

As mentioned previously, I currently have three personal cards and one business card. I used to have more, but a few other business cards were closed, both voluntary and involuntary.

The card that got closed involuntary was because I never used it and the account was eventually closed due to inactivity. There was no notice from the issuer. One day I simply got a letter in the mail notifying me it has been deactivated.

To keep an account active you will need to regularly use your cards once every year or so. Too many cards and this becomes a huge time investment. You will have to keep track of which card to use next and constantly rotate cards in and out of your wallet. Afterward, you need to remember to pay off the charges.

More Cards Mean More To Keep Track Of

Another thing you need to pay attention to besides inactivity is your monthly statements, balances, fees, and credit fraud.

Can you imagine getting dozens of statements in the mail each month? That is a lot of paperwork. Each statement means time spent opening and checking to make sure everything is ok. Those statements will then need to be filed away or shredded.

Even if a card hasn’t been used recently, you still need to take a look at the statements monthly. There have been two or three instances over the years I’ve had my AmEx card where fraudulent charges popped up on the account even though I almost never use the card. I remember one of them being a one dollar charge on iTunes from someone testing the number to see if it was valid. Have too many cards and it increases the chances of you overlooking something.

Each credit card will have also different payment due dates to keep track of. Failure to pay the minimum amount (you should never pay just the minimum if you are trying to get out of debt) each month will mean costly late payment penalties.

Those who are churning credit cards will find some of the higher-end rewards cards will have annual fees if the card is not canceled after the first introductory year. Signing up for too many cards and forgetting to cancel them in time could negate any rewards earned.

More Cards and Higher Limits Could Result In More Spending

Having higher credit limits and credit cards readily available could tempt some people to go down the slippery slope of getting into credit card debt or spending more money. This is especially true if you are overspending and buying things you wouldn’t normally buy or need simply to hit the minimum spend requirements to get signup bonuses before the introductory period ends.

Some sign up for a credit card intending to use it for emergencies. Eventually, they get to using the card for Uber Eats because not having time to cook dinner after work is an emergency.

Opening New Card Accounts Could Affect Your Credit History

Each time you apply for new credit, the credit card company will perform a hard inquiry on your credit. Recent credit inquiries have a 10% impact on your credit score. Too many inquiries in a short period of time might make it seem like you are having financial difficulties, resulting in a drop in your credit score. The effect on your credit from hard inquiries are only temporary and usually only lasts a few months.

What tends to have a longer effect from getting a bunch of new cards is your average age of your credit history taking a hit. This factor makes up 15% of your credit score. To get the highest score possible according to Credit Karma, which provides free credit scores to the credit-conscious, the credit bureaus want to see the average age of your credit history be 9 years or more.

Closing Credit Cards Could Hurt Your Credit Score

Just like how opening new credit cards could boost your score, closing old cards, whether you do it yourself or the issuer doing it because the account is inactive, could lower your score.

When an account is closed, your available credit will also decrease, therefore raising your credit utilization ratio. Over time, as closed accounts fall off your credit report, the average age of your credit history could also decrease.

These are the reasons why I still have my personal AmEx even though I rarely use it because I prefer cash back over rewards points. The AmEx is my oldest card and has a pretty large credit limit.

If you are looking to get a big installment loan in the near future, such as a mortgage or car loan, you should avoid getting new cards or closing an old account unless absolutely necessary.

Closing $ense

There is no best number of credit cards you should have. It is perfectly okay to have zero cards or two dozen cards. What is important is if you are going to use a credit card, is to use it smartly.

The ideal number of cards will vary depending on your situation. Here is what I recommend depending on different scenarios:

New to credit – one card. If you are a college student or applying for your first credit card, start with one card with a low credit limit. This will help you learn how to use credit and the low ceiling will keep you from getting too carried away.
Bad credit or recent bankruptcy – one card. You may find that getting approved for credit cards is more difficult if you’ve had credit problems in the past. Start rebuilding your credit by getting a secured credit card.
Getting out of debt – two to three cards. You may have racked up a credit card balance in your past and are now trying to pay it off. You can pay off your balance faster if you temporarily lower the amount of interest you are paying by getting a balance transfer card to transfer the balance of high-interest cards to. Don’t fall into the trap of adding to your balance because of the availability of new credit though.
General use – two to three cards. You have experience using credit and you pay off your balances monthly. Now you want to make your credit cards pay you for using them. Get whatever zero annual fee credit card with the most cash back or miles for purchases. Use that card as your primary and keep your older, less favorable card as backup.
Small business owner – three to four cards. If you are running a business, and especially if you have an online business, you will need a card to pay for services like hosting and domain fees. Get a card or two that are used for business-related charges only to keep things organized for taxes and to avoid creditors piercing the corporate veil.
Rewards expert – four to six cards. If you are willing to juggle multiple credit cards and are good at staying organized, you can maximize your rewards by using the card with the most benefits for different types of purchases. If you are looking at churning cards, many new cardholder bonuses have three month intro periods to meet the spending requirements so don’t bite off more than you can chew.

Finally, treat your credit card like a debit card. Never spend more than what you can pay off at the end of the month. Don’t get more cards than you can keep track of. If you decide you are going to stop at two cards, make sure they are on different networks. Whether you are getting your first or your twentieth card, make sure it is a rewards card. If you are going to use plastic for your everyday spending, you might as well earn some of that money back in the form of rewards. Follow these basic guidelines and you’ll be ahead of the game.

How many credit cards do you have? Have many do you carry with you? Which type of rewards card do you prefer for your everyday spending?