Q&A: How Many Credit Cards Should I Own?
Q: I’ve read that I need to have several open credit cards to build my credit, but I’m worried about having too many credit accounts. Ideally, how many credit cards should I own?
A: This is an important question that can have a strong impact on your financial health. However, there’s no magic number for the amount of credit cards you should own. The answer depends on your personal financial circumstances, spending habits and credit management skills.
Owning just one credit card
In some cases, it may be the right choice to have just one open credit card.
There are several advantages to owning a single credit card. First, with one credit card, tracking expenses is simple. Additionally, one card means one due date, so you’re less likely to miss a payment and risk late fees or negative impacts on your credit score. Finally, a single credit card encourages you to manage credit responsibly, which is crucial for building a positive credit history.
Relying on just one card can have some downsides, though. If your card gets lost, stolen or unexpectedly declined, you might be left without a payment method. You could also miss out on specialized rewards or perks that other cards offer. In addition, if you have to temporarily hold a balance over 30% of your card’s balance limit, it can negatively impact your credit score until you’ve paid it down.
Owning two or three credit cards
Many financial experts recommend having two or three credit cards. Here’s why this setup can be beneficial:
- Maximize rewards programs. Having two or three cards allows you to take advantage of multiple rewards programs. For example, one card might offer higher rewards on dining and travel, while another gives you more for groceries and gas. This setup helps you earn rewards across various spending categories.
- Lower credit utilization rate. Credit utilization, or the percentage of your total available credit limit you’re using, is a significant factor in determining your credit score. More credit cards means having a higher combined credit limit, allowing you to keep your utilization rate (on each and overall) lower.
- Backup options. Having two or three cards provides flexibility if one card is lost, frozen, or declined. You’ll have an alternative payment option in case of emergency.
While two or three cards offer more flexibility, they also require more diligent payment tracking. It’s also important to keep in mind that the temptation to overspend can increase as you gain access to more credit.
Owning four or more credit cards
If you’re an experienced credit card user and know how to manage multiple accounts, having four or more credit cards might suit your needs. Here are some reasons to consider this option:
- Specialized rewards and perks. Many credit cards are tailored to specific spending habits or lifestyles. Having several cards allows you to strategically earn rewards or access benefits like airport lounge access, travel insurance or cash-back bonuses.
- Higher credit limits for lower utilization. With more cards, your total credit limit increases, which can help lower your credit utilization rate — especially if you pay off balances each month.
- Exclusive cardholder benefits. Some credit cards come with perks like hotel discounts, concierge services and cell- phone protection. Having a mix of cards allows you to tap into benefits that might otherwise require separate purchases.
On the flip side, managing four or more cards can be challenging. You’ll have multiple due dates and reward programs to track, increasing the chance of missed payments or confusion. Also, opening too many accounts in a short time can lower your credit score, as new inquiries impact your credit report.
What should I consider when deciding on the right numbers of credit cards?
Before applying for a new card, consider these factors to determine the best number for you:
- Your spending habits. Review your typical spending to identify areas where you could benefit from specific rewards, such as travel, dining or groceries.
- Your financial goals. Are you looking to build credit, save on interest or maximize rewards? Align your card choices with your long-term financial goals.
- Your credit score and history. If you’re new to credit or rebuilding your score, start with one or two cards. For those with established credit, more cards might offer additional benefits without negatively affecting your score.
- Ability to manage payments. Each card you add requires regular payments and monitoring. Be realistic about your ability to keep track of due dates and balances.
Keeping multiple cards under control
If you decide to manage multiple cards, here are a few tips to stay organized:
- Set up automatic payments for the minimum balance or full amount to avoid late fees and missed payments.
- Use a financial management app to link your accounts and monitor your total spending in one place.
- Keep an eye on annual card fees to ensure the benefits outweigh the cost. If a card no longer serves its purpose, consider downgrading to a no-fee version.
- Review your cards annually to make sure they still meet your needs.
- For many people, their first credit card is their oldest active credit line. If you choose to reduce your total number cards, consider keeping this one open unless it’s unreasonable, because your credit score will favorably factor the long tenure of your credit history.
Ultimately, there’s no “perfect” number of credit cards; the right number depends on your unique financial situation, goals, and spending behaviors. Use this guide to find the number of credit cards that’s right for you.