From building credit to convenience, credit cards have their benefits. But how many credit cards should you have? And how many credit cards is too many?
The answer to that question is a bit subjective and depends as much on your financial habits and values as anything else. Yet there are also some practical considerations to deciding the right number of credit cards for you.
How many credit cards should you have to build credit?
How many credit cards you have directly affects your credit score. Ten percent of a FICO score depends on the mix of credit accounts – including credit cards – you have.
It can help to have different types or cards, like credit cards, retail cards, and charge cards. But how many credit cards is too many “will vary depending on your overall credit picture,” according to MyFICO.com.
The average number of credit cards per cardholder in the U.S. was 3.7 in 2014, according to a survey from CreditCards.com.
A CreditKarma survey found having more credit cards corresponds with higher credit scores. Cardholders with credit scores over 700 have about six credit cards on average, while those with scores over 800 average seven.
Of course, this doesn’t mean that you have to have seven cards to have a high credit score. This correlation might simply reflect that consumers with better scores can easily get approved for more cards.
But it also shows having multiple credit cards won’t necessarily damage your credit. If you want to build credit, it helps to hold and responsibly manage one or more credit cards.
Should you open a new credit card?
If building good credit is a central goal in using credit cards, then you’ll need to be careful about how you go about opening new accounts. Ten percent of a score is based on new credit, and having several new credit cards could look bad on your credit. Having a combination of new credit card alongside older credit card accounts is ideal.
A temporary, initial drop in your credit score is normal right after opening a new credit account. However, credit bureaus and lenders view applying and opening many cards in a short time as risky borrowing behavior.
Following these tips will help you get the credit cards you’re interested in while maintaining or building good credit:
- Shop around for a credit card before you apply. This way you can identify cards you qualify for and meet your needs.
- Check credit cards costs. You want to avoid high fees and high APRs when possible. With multiple cards, those costs quickly add up.
- Apply only for cards you intend to use. “There is no ‘golden number’ of charge cards, but opening cards just to gain a small savings is usually a bad idea,” states MyFICO.com.
- Limit credit card applications. Don’t apply for several new cards at once. Space credit card applications by six months or so to avoid hurting your credit.
- Avoid closing credit cards. Keeping cards open will boost your average account age and keep a low credit utilization ratio. Both can give you a better credit score.
How many credit cards is too many?
As shown above, having multiple credit cards won’t hurt your credit and could even give it a boost. But you can definitely have more credit cards than you can manage.
You’re overspending with credit cards
If you’re having trouble responsibly managing your payments and facing credit card interest or fees, that’s a red flag. It might be time to put some cards away and stop opening new ones.
Many cardholders have trouble limiting their spending with credit cards.The best way to spend with credit cards is to limit spending and pay it off each month.
But swiping plastic feels easy. If you have many credit cards, this problem can be compounded as your balances grow on each one. It’s all too easy to get yourself into credit card debt.
Plus, you’ll be paying interest on your credit card balances and suddenly, having so many credit cards is costing you money.
You’re paying too much in credit card fees
Another sign you have too many credit cards is if you’re paying more in credit cards fees than you’re getting back in cardholder benefits. The big one to look for here is your annual fee.
Some credit cards, especially rewards cards, have high annual fees of up to $100. If you’re paying that on several credit cards, it quickly adds up.
If you’re a big spender, you might charge enough on those cards that the rewards you get back exceed your annual fee. But trying to spread spending across multiple cards to ensure you get enough rewards will be expensive, and a hassle.
Your credit cards should work for you
So how many credit cards should you have? Ultimately, you decide. Credit cards are important financial tools and holding more comes with no inherent drawbacks. And in many ways, holding several credit cards benefits your money management.
But since credit cards are tools, they should be working for you and your finances – not against you. If your credit cards are getting you into debt, costing you money or just causing hassles, you might have too many. Keep an eye on credit card costs and spending to ensure they are under control.
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