How Many Credit Cards Is Too Many?

This is a collaborative post from Deborah on debt.

A look inside an average American’s wallet will show you up to three credit cards most of the time. This leads to questions like, “how many credit cards is too many?”  Unfortunately, there isn’t a one-size-fits-all answer to this question. It all depends on each person’s financial habits, the ability to repay loans, and the reason for getting multiple credit cards.

Having multiple credit cards can help or destroy your credit score — it all depends on how you manage them.

When you use your credit card, your credit score information will be easily accessible to most loan institutions. If your score is low, it can be difficult to access some loans. Companies like CreditNinja can give you online loans without a credit check.

Is it Good to Have More Than One Credit Card?

Having more than one credit card has its advantages and disadvantages. It all depends on how you manage them. You get the chance to boost your credit score quickly because there are multiple avenues to generate information to be sent to the credit bureau monthly.

The downside is that this information can either be positive or negative, and it will affect your credit score anyway.

It’s very tempting to take a new credit card, especially when they are different from each other and offer you specific benefits. 

Why Have Multiple Credit Cards?

It Can Help Build Your Credit Score

One of the reasons people take credit cards is to build their credit score. Multiple credit cards will help you build your credit score faster. If you can make all payments on time, it will not only increase your credit score but also increase your creditworthiness and give you access to more loan opportunities.

It Keeps Your Credit Utilization Score Low

Having one credit card will put a lot of strain on your credit utilization score. Because it’s the only one you have, you may have to use it all the time and use up to 90% of your credit limit per month. Naturally, this increases your credit utilization score, but with multiple cards, you get to spread your credit limit among them and maintain a healthy credit utilization ratio.

Increase Your Credit Limit

More cards will automatically give you a higher credit limit because each card has its limit. All of them put together will provide you with a higher credit limit than someone with one card. However, you should avoid maxing all of them at once.

More Rewards and Benefits

Different cards mean different benefits. Multiple cards will enable you to enjoy all available rewards. Each credit card company gives its users rewards and incentives for using them, and the more cards you get, the more benefits you enjoy.

Downsides to Having Multiple Credit Cards

Some disadvantages to having multiple credit cards include:

It Can Reduce Your Credit Score

Defaulting on multiple credit card payments can plummet your credit score drastically. Try not to default on any payments to keep your credit score up.

Difficulty in Tracking Payment Dates

When you have up to five cards, you might have a credit card payment due often, and it can be difficult to keep track of all the due dates. This might make you default on some payments unintentionally, which affects your credit score negatively. It’s advised that you write to your credit card companies to move your payment days to the same dates every month.

Once you can keep track of your repayment dates and make your payments on time, your credit score will be fine.

How Many Credits Cards Is Too Many?

More than two or three credit cards is too many.  Why? The simple answer is there is an administrative headache of keeping track of paying so many bills.  It’s bigger than an administrative headache though.  It’s hard to know how much you are really spending if you are spreading your accounts around too much.

One or two is plenty unless you own a business.  Keep it simple.  Don’t chase rewards.  Instead focus on the value of a credit card being that you can easily track spending.

Should I Take Out More Credit Cards To Improve My Credit Score?

The best way to increase your credit score is to pay off your debts.  Simplify your life by consolidating your credit cards so you can focus on understanding your spending.  Addressing your spending is attacking the illness, focusing on anything else is concentrating on the symptom.  Attack the spending.

What Should I Do If I Have 4 or More Credit Cards?

Consolidate.  Focus on streamlining your outflows so you can understand what you are truly spending on.  If that isn’t enough motivation that realize that you are increasing your chances of identity theft, or any theft, by having so many accounts open.

Borrow less.  If you need so many cards, you might be spending more money (or time managing your money) than you need to.  

The Bottom Line

The number of cards you can have solely depends on you, your need for them, and your ability to manage them. For some people, having two credit cards can be too many, especially if they can’t keep up with payments.

To know how many credit cards you need, answer these questions. How will each card work for me? What is the benefit of getting another card? Can I keep my balances low and pay back on the due dates? Do I want the administrative headache of tracking multiple cards?