If you already have a couple of credit cards and are wondering how many is just too many, there’s no straight answer to that. According to Experian, Americans had an average of 3.84 credit cards during the third quarter of 2020. It’s certainly true that having multiple credit cards can make your payments unsustainable. However, there’s no magic number as to how many credit cards you can have. It all boils down to how you intend to use them. In some cases, it’s even advantageous to have multiple cards since you can maximize rewards and annual statement credits. On the flip side, the combined limits of credit cards can affect your credit score.

How Many Credit Accounts Is Ideal?

The top factors affecting your credit score include your payment history and credit utilization ratio. So long as you make timely payments and keep the balances on your credit card accounts low relative to your limit, creditors will deem you responsible at managing your credit.

Credit formulas don’t penalize you for having multiple credit accounts, but having too few can hurt your score. Most credit bureaus suggest five or more accounts, which can be a mix of loans and credits, as a reasonable number to build over time.

If you have too few accounts, it can be hard for scoring models to render a score for you. Bureaus consider four or fewer accounts to be a “thin file”, which is harder to score. Plus, thin files are viewed as riskier.

On the other hand, having too many cards can complicate life if you miss a payment. And this will hurt your credit score.

The Right Amount

Usually, most people build their credit portfolio gradually over time as their credit needs expand. Generally, your spending habits and ability to settle your debts on time should help you determine how many credit cards are ideal for you.

Your biggest concern about having multiple cards is the effect on your credit score. One thing to keep in mind is that having more than one credit card can make it easier to keep your credit utilization ratio low. This is the total credit balance relative to your total credit limit on all your open credit card accounts.

You want to keep this percentage as close to zero as possible if you want it to positively impact your credit score. Typically, you want to keep your credit utilization ratio below 30 percent.

Having multiple credit cards helps you spread your charges, and it becomes easier to keep your credit utilization ratio low. If you can handle your credit wisely, keep track of payment due dates, and keep your credit utilization ratio low, there’s no problem owning multiple credit cards.

Benefits of Having Multiple Credit Cards

Like we mentioned, there are good sides to owning a couple of credit cards. These include:

  • Positive effects on your credit score. Multiple credit cards allow you to maintain a low credit utilization ratio on each of them. This ratio is a key factor in determining your FICO score.
  • Access to multiple rewards programs. Different cards offer different perks, meaning the more cards you have, the more access to the different types of rewards.
  • Let’s you separate expenses. You can opt to use one card for all job-related expenses. This makes it easier to get reimbursed by your employer with a credit card statement that just shows purchases for travel purposes.
  • Access to a higher credit limit. Increasing your number of credit cards over time also increases your spending capacity. This gives you some extra spending power that you can use to finance additional expenses or high-value purchases.
  • Balance transfer facility. If you own more than one credit card, you can transfer the outstanding balance from your multiple credit cards to a single card and then repay the amount at your convenience.

Potential Risks of Owning Multiple Credit Cards

On the downside, there are a few risks associated with having many credit cards:

  • Negative effects on your credit score. Opening a new credit card hurts your credit score, albeit, modestly. Your score can recover quickly, but only if you utilize your credit card responsibly. 
  • You might overspend. With every new credit card you open, you’re increasing your temptation to spend too much. A higher credit limit might lead to reckless spending, where you end up buying stuff you don’t really need. As a result, you may fall into a potential debt trap.
  • Higher risks of hurting your credit score. Unless you’re responsible and keep track of your payment debts, you can easily miss out on paying your dues on time, causing your credit score to drop.

With that in mind, you may want to consider the following points when assessing your need for owning multiple credit cards:

  • Your ability to repay
  • Your credit score
  • Credit utilization ratio
  • The number of credit inquiries

Botton Line

Owning multiple credit cards has its pros and cons. But, if you can responsibly manage several credit card accounts, you’ll enjoy all the benefits that come with it. A wise move is to open different accounts that offer different rewards that will be beneficial to you.

Just avoid signing up for too many cards at once since doing so can hurt your credit score.

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