How Many Credit Cards Should You Have?

May 24, 2017 | Be First to Comment!

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What’s in your wallet?

No, I’m not just quoting CapitalOne commercials - although the bank did hit on a great question to ask when it comes to your credit cards. So seriously: what’s in your wallet right now? How many credit cards do you have?

And more importantly, how many credit cards should you have?

The short answer is, it depends. Like almost everything when it comes to personal finance, the right answer for you depends on the factors, challenges, and goals unique to your personal situation.

The long answer involves diving into those different pieces to help you determine how many credit cards you should have in your name at any one time.

How Many Credit Cards Is Too Many?

Another thing that makes this question tricky to answer is the fact that everyone has a different opinion. Some staunchly anti-debt crusaders will say even one credit card is too much!

I started asking this question for myself when I wanted to learn more about travel hacking. As Nomadic Matt puts it, travel hackers are “the people constantly chasing miles, rewards points, and elite status. They are looking for every possible way to game the system for as much free travel as they can.”
When I was in my early 20s with a low income but a lot of financial knowledge, travel hacking sounded like the perfect solution. I wanted to travel more but needed to find a way to do it on the cheap.

By travel hacking, I could use credit cards to generate points I could redeem for travel - instead of using my cash savings to pay for trips. This worked well for me because I was financially responsible.

I never carried a balance on my credit cards and only charged what I already planned to spend on my cards. I never manufactured spending or used “I gotta get reward points!” as an excuse to spend beyond what my budget said I could.

Travel hacking works best when you take advantage of opening new cards and getting sign-up bonuses. These usually require you to spend a certain amount (somewhere between $1,000 and $3,000) in a certain time frame (usually 60 to 90 days). When you meet those requirements, you get a lot of points all at once.

But after you hit the bonus, it’s hard to earn points through everyday spending. You might need to spend $100 just to get 1 point - and redeeming flights could cost thousands of points.

And because I was financially savvy, I wondered - how many credit cards should I have? How many is too many?

How to End Up with 6 Credit Cards Before You’re 25

My travel hacking did enable me to save thousands of dollars on a few trips. I went to New Orleans and didn’t pay a dime for my hotel or flight. I only paid $300 to fly to Dublin after using points to pay for the rest of the plane ticket.

These and other trips like them were great experiences, especially because I saved so much cash. But through my adventures in travel hacking, I determined my limit was 6 different credit cards.

I tracked them all carefully, but it was a lot to keep up with. I wasn’t even 25 and the total amount of credit available to me was almost $150,000.

When I added up the credit limits on all my cards, it scared me a little. I never went into credit card debt, but the fact that I could spend far more than I could afford to repay overwhelmed me. By the time I reached my late 20s, I decided to narrow down the cards in my wallet.

Now, I carry just three credit cards and they all serve a specific purpose. I have an American Express business card that I use for my business expenses, another American Express card tied to a specific hotel chain that I use for my everyday spending, and a Visa card tied to a specific airline that I use if an establishment doesn’t accept American Express.

That’s my personal answer to how many credit cards should you have: as many as you need for specific purposes. In my life right now, that’s a card for business, a card for personal use, and a backup just in case.

It’s Really Not the Quantity: It’s the Quality

Your answer may look a little different than mine - and in fact, it probably should. That’s because your financial habits, behaviors, and goals are likely different than mine!

You can use one credit card or 10 credit cards and end up with the same credit score over time. What will impact your score is how many new accounts you open in a short amount of time, or how many inquiries you generate on your report.

But the specific number of total accounts won’t directly change your credit score. So to help you determine how many credit cards should you have in your own wallet, don’t think about a specific quantity. The real answer lies in how you manage the cards you do have.

This requires that you be honest with yourself. Ask yourself the following questions:

  • Do I have a lot of debt right now?
  • Am I struggling to manage my finances?
  • Do I have a reason to need or want multiple credit cards?
  • Is my credit score low?

If you answered “yes,” to most of these, you should consider having just one or two credit cards - and learning how to use them wisely. Once you can manage just one or two cards well, then you can revisit the conversation and see if adding another card makes sense.

On the other hand, if you feel confident about how you manage your finances and your credit you might want more cards. Just make sure you track every single one carefully and only charge what you can afford to repay.

When I used multiple cards, I kept an Excel spreadsheet that listed out the type of card, the last four digits on the card, the credit limit, and when I opened the account - along with some other important info. This kept me organized and ensured that nothing slipped through the cracks.

To really reap the benefits of holding many cards, make sure your collection is diverse so you have options when you go to pay. And continue to keep low balances on the cards and pay them off on time and in full each month. These actions will help boost your credit score.

The Benefits (and Downsides) of a Lot and a Little

Whichever way you choose to go, it’s important to recognize that there are pros and cons to both having lots of cards and forgoing cards entirely. If you want to use as few cards as possible, it will be easier to keep up with your spending, card use, and balances.

Not only is it easier to track your own activity, but it’s easier to monitor your cards for fraudulent charges. You should always read through every statement to make sure the charges are accurate and ones you made. Having just one or two cards makes that a lot easier to do every month.

With just one or two cards, it’s also easier to stay out of financial trouble. No matter how many cards you have, you need to take responsibility for your spending. But keeping two cards with $5,000 worth of available credit tends to limit the financial damage you can do to yourself.

Having multiple cards with various limits gives you more opportunity to overspend, lose track of your balances, and end up in debt.

But only holding a small number of cards can also limit your credit score. If you use one card and regularly exceed a 30% credit utilization ratio, your score could suffer. Having lots of cards means you probably have more available credit, making it easier to maintain a low utilization ratio. That could help your score improve over time.

To have multiple cards also gives you multiple opportunities to build a positive payment history. That’s a huge chunk of your score, so showing you can successfully manage a number of cards can boost your credit too.

FICO Credit Score Factors and Their Percentages

FICO credit score factors Percentage weight on credit score: What it means:
Payment history 35% Your track record when it comes to making (at least) the minimum payment by the due date.
Amounts owed 30% How much of your borrowing potential is actually being used. Determined by dividing total debt by total credit limits.
Length of credit history 15% The average age of your active credit lines. Longer histories tend to show responsibility with credit.
Credit mix 10% The different types of active credit lines that you handle (e.g., mortgage, credit cards, students loans, etc.)
New credit 10% The new lines of credit that you've requested. New credit applications tend to hurt you score temporarily.

There’s more flexibility with your payment options with lots of cards. If you have more than one or two that you can use, you always have a backup in case a card is lost, stolen, or simply not accepted.

And of course, more cards could mean more rewards. That’s why I carried a lot of cards back in the day. I took advantage of special offers and sign-up bonuses. Because I carefully managed and tracked every card, using many lines of credit helped me create a great credit score and save money on travel.

How Many Credit Cards Should You Have in Your Wallet?

Ultimately, this decision is up to you. There’s no one right (or wrong) answer.

You might have a specific purpose or goal you want to achieve. You should carry five credit cards if you’re looking to maximize flexibility, spending power, or rewards. But you should carry just one credit card if your financial goals are more along the lines of getting out of debt or learning to manage your money.

Be honest with yourself and recognize the level of complexity you can handle in your financial situation. Stick with just one or two cards if you want to keep things simple. Look into more cards with specific purposes if you feel comfortable getting more complicated and adding on more responsibility.

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