How Many Credit Cards Should I Have? Best Practices for Credit Cards

According to a Credit Karma report, the average American has 2.5 credit cards. Some have two; for others, it’s three. Of course, outliers may have more or less. The number is all over the place, which raises the question–how many credit cards should I have?

There’s no perfect answer, like so many other things in life, because personal finance is personal. However, you can use some essential criteria as a guide.

Credit cards are a staple of American life and finances. More than 191 million Americans have at least one credit card, and the average cardholder has 3 credit cards and 2.3 retail store cards.

However, how many credit cards you should have begins and ends with you, your habits, and your financial situation. So, keep reading to learn about the pros and cons of how many credit cards fit your budget and lifestyle.

Credit Card Pros

Credit cards come with some advantages that benefit owners. When used responsibly, credit cards make life easier and maximize your dollars. Here is a list of some credit card pros:

1) To build credit. There’s no arguing that money is essential. Credit extends your purchasing power for a home mortgage, to invest in a business, and to finance an auto loan. In addition, you can use credit cards to build credit responsibly. You show creditworthiness with your flawless payment history and low utilization rate. As a result, your FICO score improves, resulting in better financing options in the future.

2) To earn rewards. Nobody wants to spend more than they have to. So credit card companies may offer cashback or points on your everyday purchases to save you money with little effort. In addition, many cards come with sign-up bonuses that encourage up-front spending for more significant rewards. Pay the balances off without interest, and you win.

3) Convenience. Credit cards are easy to use and more convenient than cash. They take up less space in your wallet and allow you to keep more money in a high-interest savings account longer. However, this pro can quickly turn into a con when not used wisely.

Related: Who Is the Richest Family in the World?

Credit Card Cons

Despite many advantages, credit cards also come with a few disadvantages. Here is a list of some credit card cons:

1) The potential to overspend is real. It’s easy to spend more than you intend when using a credit card versus cash–and there’s science to prove it.

Professors Drazen Prelec and Duncan Simester found that participants spent more when making a credit card purchase. They reasoned that credit card purchases don’t use real money. Instead, consumers borrow money with a small agreement to pay it back over time.

As a result, they’re likely to forget the pain of spending their hard-earned money until the bill comes in, leading to a cycle of debt-riddled purchases to keep up with their lifestyle.

Fast-food restaurants such as McDonald’s, Burger King, and Wendy’s didn’t always take credit cards. However, once they did, they noticed their value–cashless purchases at fast-food restaurants were 35% higher than cash purchases.

It’s less psychologically painful to spend tomorrow’s earnings than the money in your bank account today. However, those who pay for their purchases today have more enjoyment with the product than those financing them with credit cards.

2) It’s expensive if you don’t pay off the balance every month. Credit cards have high-interest rates that can take years to pay off when only paying the minimum balance. It can get out of control quickly. Some credit cards also come with extra fees such as transition fees and annual fees to add to additional credit card expenses. It’s easy to find yourself in long-term debt with credit cards.

3) It can hurt your credit if you miss a payment. Just like credit cards can help your credit score, they can damage it. Missing one payment could result in a late fee that stays on your credit report for up to 10 years. In addition, these innocent missed payments can impact future credit applications and terms of use.

How Many Credit Cards Should I Have?

A magic formula to calculate the number of credit cards you need doesn’t exist. There are many pros and cons. However, it ultimately comes down to your financial situation and spending habits. You must consider your income, ability to pay bills on time, budget, and money habits.

Having multiple credit cards comes with a lot of responsibility. After all, it’s not free money. Your ability to budget and live within your means are strong indicators of your ability to manage credit wisely. Credit cards can end up costing you more in the long run and significantly impact your long-term financial goals if not used properly.

For some people, having one credit card is enough. It allows them to build credit, earn rewards, and track their spending while paying off each month’s balance. For others, it could be three credit cards.

Of course, some people prefer not to have a credit card. They don’t like the risk of missing a payment or out-of-control spending that can be associated with credit cards, or perhaps, they’ve had a bad experience in the past.

How many credit cards should you have? Here are 5 things to consider.

How Will It Affect My Credit?

The first thing you probably think about when it comes to opening new credit card accounts is how having multiple cards will affect your credit and credit score.

While it’s true that each new credit card application will result in a hard inquiry and a likely hit to your credit score, that hit will be temporary as long as you continue to practice good credit habits like paying all your bills on time every month. In fact, the average credit recovery time after opening a new card is just 3 months.

Aside from the initial credit score hit, opening new credit cards can also positively impact your score, granted you use the cards responsibly. This is because your debt-to-income ratio is a significant part of the formula that goes into determining your credit score, so the more credit you have available to you, the more likely your utilization will be lower.

It is recommended that you keep your debt-to-income ratio below 30% of your available credit. For example, if you have $10,000 total credit available to you and a balance of only $2,500, your utilization is 25%.

Thus, having multiple credit cards will not negatively affect your credit score as long as you keep your utilization below 30% and pay your bills on time every month.

Can I Pay Off My Credit Cards Every Month?

While paying your minimum credit card payments every month is absolutely critical, ideally, you should be able to pay your cards off every month.

Too often, people rely too heavily on credit cards and get into the habit of carrying balances. Although your credit won’t be seriously impacted as long as you make minimum payments, having balances can put you in a never-ending debt cycle and negate any rewards you may be earning with your cards.

The average household credit card debt is $5,315, and if you’re not paying those balances off, you’ll be paying heavy interest payments that will make it hard to ditch that debt for good.

Thus, when deciding how many credit cards you should have, you should first look at the cards you currently have and whether or not you’re able to pay off your balances every month.

If you’re only looking to open more credit cards to max them out, then seeking out more credit is a bad idea.

Can I Manage Multiple Credit Cards?

Even if you’re good about paying off your credit card balances every month, the more cards you have, the more difficult it can be to manage them all.

One or two credit cards, especially with the same company, are pretty manageable. But, once you open 5, 6, or more different cards, likely with different issuers, it can be a bit harder to track everything and make sure you’re not overstretching yourself.

Only you will be able to determine whether you can manage more cards than you already have, but the key here will be coming up with a system to track and manage everything. Many budgeting apps allow you to connect credit card accounts, making tracking your spending much easier.

Another option is to stick to cards issued by the same provider, although that may limit the rewards you can earn.

Do I Need Different Cards for Different Purposes?

Aside from gaining access to more credit, most consider opening up more credit cards to gain access to cards that serve different purposes.

For instance, those with debt across multiple cards may look to take advantage of balance transfer card offers with lower interest or a 0% interest period. Or, you may want a card with travel protection and no foreign transaction fees if you’re a frequent traveler or travel for work.

However, the main reason most continue to open up credit cards is for rewards and sign-up bonuses. Credit card churning and travel hacking using credit cards is a major players in helping people travel for less or have access to travel they wouldn’t usually be able to indulge in.

Thus, you may want more credit cards to continue earning sign-up bonuses and to earn rewards to different programs, such as your favorite airlines and hotels.

While opening more accounts to access various rewards isn’t a bad thing, it’s crucial to understand various card issuer rules around opening up cards and spreading out your acquisition of new cards. In addition, opening up many credit cards in a short amount of time is generally seen as a red flag that may impact your applications.

What Should I Do With Cards I Don’t Need or Use?

The last major factor to consider when answering the question “how many credit cards should I have” is what to do with cards you no longer need or use.

Especially for those in the points and miles game who regularly accumulate new cards, you’re likely opening most cards to earn the sign-up bonus and then moving on to your next target.

So while you may have a few staples that you use regularly, many of your cards will only be used while trying to earn the sign-up bonus and then discarded.

As with opening up new credit cards, canceling credit cards will also likely impact your credit score. Luckily, the impact is relatively minimal as it only takes 3 months on average for your credit score to recover to pre-closure levels.

While there is no harm in putting unused cards in a drawer and letting them sit, annual fees can add up quickly. Thus, the main factor to consider when deciding which cards to keep and which to close is whether or not the card has an annual fee and if it does, whether the card has benefits that balance out the annual fee.

For instance, some rewards credit cards come with free hotel nights or travel credits that make the annual fee more than worth it.

If the benefits don’t outweigh or mitigate the fees, consider closing the card if it’s not being used. However, consider keeping cards without annual fees in order to extend your credit history.

Is There a Such Thing as Too Few Credit Cards?

There’s no punishment for not having or using a credit card. However, credit cards can help build credit. It’s hard for banks to give you a loan when you haven’t shown that you can pay the money back.

Only owning one or two credit cards may lead to a high utilization rate. If you don’t pay your credit card balances on time, you run the risk of looking like you’ve maxed your credit line.

For example, if you own two cards with a combined maximum credit limit of $10,000 and acquire a $5,000 balance, you’ll have a 50% utilization rate. On the other hand, if you have four credit cards with a combined maximum credit limit of $20,000 and acquire a balance of $5,000, you’ll have a 25% utilization rate.

While neither of these utilization rates is optimal, a 25% utilization rate appears better than 50%. It may be more challenging for creditors to judge your creditworthiness when you don’t have much experience with credit. At the same time, having too many cards can be problematic.

How Many Credit Cards Are Too Many?

We don’t have a perfect number of credit cards to have. So, we don’t know how many are too many. But, we know too many isn’t a good idea.

Opening too many credit cards close together can negatively impact your credit score. However, there are a few more problems.

They’re a lot to keep track of in your budget and bill pay. In addition, you increase your chances of spending more than you intended when using credit cards.

As you’re building your wallet of credit cards, ask yourself the following questions to help you determine if you have too many:

  • Can I track my credit card spending properly?
  • Will I pay the balance in full for each card before its due date?
  • Will I lose money by paying too many fees?

Good Practices for Credit Cards

There’s nothing right or wrong with owning a credit card. It’s personal. Just keep in mind, cards work for some people and don’t for others. So, if you use a credit card, be sure to do it wisely. Credit can enhance your financial situation or destroy it.

Here’s a list of good credit card habits to build:

1) Use a budget. Use your budget to track credit card spending by category. Don’t spend more than you plan to pay back at the end of the month.

2) Pay the monthly balance before the due date. There’s no rule that you have to pay the balance on the due date. Instead, pay the money back to the credit card as you spend it. This way, you see the money leaving your primary checking account just like using a debit card or cash. If you don’t like the idea of logging in every day, set a goal to pay the credit card balance weekly.

3) Check your credit score regularly. Pay attention to your credit utilization and credit score with credit reporting agencies like Experian, Transunion, or Equifax. You may need more credit one day. So, you want to make sure you’re managing it well.

4) Maintain a low utilization rate. Don’t max out your credit card balances. Instead, pay them off as you accrue them to keep your credit score up.

5) Minimize the frequency of opening new accounts. Have a plan for your credit. Don’t open accounts just to open them and keep track of the ones you have. You need to pay attention to the credit in your name. Opening accounts frequently can harm your credit score, hurting your financial situation later.

6) Look for cards with no annual fee and low-interest rates. Building your credit with a credit card is acceptable. However, you don’t want to pay more than you have to. So stick to cards with no annual fee and low-interest rates.

7) Avoid cash advances. Even if paid back early, a cash advance comes with extra fees. So, just avoid them for simplicity. Instead, only spend the cash that you have.

How Many Credit Cards Can You Safely Manage?

The truth is, you can have as many credit cards as you want. After all, Walter Cavanagh is in the Guinness Book of World Records with a whopping 1,497 credit cards.

The real question is, how many credit cards can you safely manage?

If you can pay your cards off every month and are organized enough to manage multiple cards without getting yourself into trouble, then the only factor limiting the number of credit cards you should have is you.

Just remember to consider the purpose of the credit cards you’re opening, as well as annual fees and other card benefits that will help you determine whether to keep or discard your cards.

Related: Finding the Best Rewards Credit Card for How You Spend

The Bottom Line

Credit cards are helpful for a variety of situations. For example, they’re convenient and may earn you rewards. However, the opposite can be true in some cases. They’re one more thing to think about every month and one more bill to pay. So, do you need one?

It’s a personal decision based on your financial situation and money habits. Not owning a credit card is acceptable. In other cases, holding three cards works best. It comes down to your ability to pay them off without owing interest and keep your spending in check.

Regardless of the number of credit cards you have, don’t forget to follow good credit card practices to build good credit, maximize rewards, and minimize credit card expenses.

Unless you have a stack of cards sitting in a drawer somewhere, most people only actively use 2-4 credit cards, and that’s all most will need.

If you’re a card churner, make sure you keep track of annual fees, benefits, and card issuer rules so that you don’t get yourself into trouble or have your applications declined.

On the other hand, if you’re the average credit card user in the United States, we’d recommend finding a couple of cards that match your spending and desired benefits and sticking with them.

This post was produced by Savoteur.




Theresa is the founder of the blog In The Game Investing. She is a personal finance and investing enthusiast, helping professional women take control of their money and investments.