How Many Credit Cards You Should Have
When it comes to the number of credit cards a person should have, there's no single magic number. The average American owns about four credit cards.1 But is that too many? Too few? Ultimately, it depends on your personal financial situation. Find out what to consider when deciding how many credit cards you should have in your wallet.
How Credit Cards Affect Your Credit Score
Before you worry about choosing the right credit card, it's important to understand how credit cards impact your credit score. Having good credit isn't just important for borrowing money; you need good credit to rent an apartment, open utility accounts and in some cases, get a job. Let's look at how your FICO credit score (the most commonly used scoring model) is calculated:2
- Payment history: 35%
- Amounts owed: 30%
- Age of credit history: 15%
- New credit: 10%
- Credit mix: 10%
Each one of those credit score factors can be impacted by the credit cards you have, either positively or negatively.
Payment history is the most heavily weighted factor in calculating your credit score. This means paying your bills on time — including monthly credit card bills — is the best thing you can do for your score. However, missing even one payment can knock your score down considerably.
Amounts owed refers to the total amount of debt you owe in relation to the total amount of credit extended to you. This is known as your "credit utilization ratio."3 For example, if you have a $5,000 credit limit and you charge a $1,000 balance, your credit utilization ratio would be 20%. Revolving debt, such as credit cards, tends to be weighted more heavily when factoring amounts owed into your overall score. It's recommended you keep this number below 30% to maintain a good credit score, though even less is ideal. Even if you pay your entire balance off every month, you could get dinged for running up a large balance before your bill is due. That's because credit card companies often report balances to the credit bureaus on a separate date than your payment due date. You can call your card issuer to find out when they report your balance — and be sure to pay it down ahead of time to keep your credit utilization ratio low.
Age of credit history
Another variable that impacts your credit score is the total number of years you've had credit-based accounts — plus the average age of all your accounts. The longer your credit history, the more confident lenders are in your ability to manage debt responsibly. However, opening new credit cards can lower the average age of your credit, which will decrease your credit score. For example, if you owned one credit card for 10 years and then got a new one today, the average age of your accounts would drop to five years. That's not a big deal if you open a new card every once in a while, but getting several new cards within a short period of time can make your credit history appear shorter. So it's best to apply for new credit sparingly.
Applying for too many cards over a short period of time can also be a red flag that you're overly dependent on borrowing to get by. That can ding your score.
Lenders like to see that you have experience managing a variety of debt, from revolving lines of credit to various types of loans. So if the bulk of your experience managing credit is with credit cards, your score may slightly benefit from diversifying your credit mix by taking on a mortgage, auto loan, or personal loan. But don't worry too much: Since this category only makes up 10% of your score, there's no need to go out of your way to take on other types of debt. It's always best to borrow only what you need. That said, a personal loan can be a great way to consolidate higher-interest credit card debt into a one, lower-interest monthly payment.
Applying for too many cards in a short period of time can be a red flag that you're depending on borrowing to get by. This can impact your credit score.
Benefits to Owning Multiple Credit Cards
There are many types of credit cards that offer different perks and rewards. Maybe you charge the bulk of the household shopping and could benefit from a cash-back card. Or maybe you fly a lot and a travel credit card could help you earn free miles. Whatever your lifestyle looks like, there's likely a card (or two) that matches it. Having more than one credit card allows you to mix and match according to your spending patterns, and get the most money back possible. Another potential perk: Your credit score could go up. By having more than one credit card, your total available credit will increase. As long as you keep your balances low, that will help decrease your credit utilization ratio. It's one big reason why you should avoid closing credit card accounts, even if you're not using them.
Drawbacks To Having Several Credit Cards
Though having several credit cards can be convenient — and lucrative, if managed wisely — there are also some disadvantages. Owning and using multiple credit cards means you have several balances to watch — and payment due dates to remember. If you aren't careful, you could end up with too much debt adding up across your accounts. And if you're the forgetful type, it can be easy to miss payments. Not to mention, it's easy for scammers to use your cards fraudulently if you're not actively monitoring the activity. Plus, some of the more lucrative rewards cards come with annual fees. That means you could end up spending a couple hundred dollars each year just to own your cards. That may be worth it if you truly maximize your rewards earnings. But if not, the annual fee could end up costing you more than you save.
How Many Credit Cards Are Right For You?
For most people, it's ideal to have cards from at least two of the four big networks: Visa, MasterCard, American Express and Discover. That allows you to have a backup in case you lose a card or a merchant doesn't accept a certain network (a common issue with Discover and AMEX cards).4 Plus, you can take advantage of different types of rewards that suit your lifestyle, such as a cash-back card that lets you earn money back on grocery shopping and a business credit card that helps you save on home office supplies and travel. As far as the maximum number of cards you should have, it's really up to you. Try to strike a balance between having the cards you need, but also keeping your credit utilization and fees low. For some, that might mean just a couple. For others, it could be 10. The number of cards you have is less important than how you manage them.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
- Stefan Lembo Stolba, "What Is the Average Number of Credit Cardsper US Consumer?" Experian, published April 8, 2021, accessed Aug. 18, 2021. Back
- Louis DeNicola, "How Is Your Credit Score Determined?" Experian, published Feb. 12, 2021, accessed Aug. 18, 2021. Back
- Lindsay Konsko, "How to Calculate Your Credit Utilization Ratio," NerdWallet, published Dec. 23, 2020, accessed Aug. 19, 2021. Back
- Michael Keenan, "Why American Express and Discover Credit CardsAren't Accepted Everywhere," GOBankingRates, published June 23, 2017, accessed Aug. 18, 2021. Back
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