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Credit & Finance

How Many Credit Cards Should I Have?

Written by Dan Rafter for NortonLifeLock

What’s the “sweet spot” for the number of credit cards you should own? Just one? Maybe two? How about three or more?

Not surprisingly, there’s no right answer to this question. That’s because the relationship between credit cards and your three-digit FICO credit score is complicated. It’s not necessarily how many credit cards you have that causes your credit score to rise or fall. It’s more about how you use them.

What is certain is that credit cards have become an important spending tool for a growing number of U.S. consumers. Experian says that 61 percent of U.S. consumers had a credit card in the second quarter of 2019. That’s an increase of 8 percentage points since the second quarter of 2015.

If you’re one of the many who rely on credit cards, how much plastic should you keep in your wallet? Read on for some advice on how this number could impact the health of your credit score.

Do I need a credit card?

How many credit cards you need is certainly up for debate. But if you want to build your credit score, having at least one credit card is a good move, as long as you use that card responsibly.

Every time you make a credit card payment, it is reported to the national credit bureaus of Experian, Equifax, and TransUnion. Building a record of on-time credit card payments, then, can help boost your credit score.

You do have to be careful, though. Only charge what you can afford to pay off in full each month. That way, you also won’t carry a balance on your credit cards each month. Carrying a balance can lead to higher levels of debt quickly because the interest rates attached to credit cards are usually high. Think how fast your unpaid balance can grow each month if the interest rate on your credit card is 19 percent or higher.

The best way to use a credit card, then, is to make purchases but to always pay them off in full on or before your credit card’s due date. Remember, too, that making a late payment on your credit cards — your payment will be reported late if you pay 30 days or more past your due date — can hurt your credit score. A single late credit card payment could drop your credit score by 100 points or more.

How many credit cards do I need?

Having two, three, or even four credit cards is OK — as long as you’re paying your credit card bills on time, every time, and not running up significant credit card debt.

The number of credit cards, again, isn’t nearly as important as how you use them. Running up large amounts of credit card debt will hurt your credit score and so will paying your bills late, no matter how many cards you have.

As you consider the number of credit cards you should have, here are some factors to keep in mind:

Have you struggled with credit card debt in the past? If so, you might want to limit the number of credit cards you have. If you have a history of carrying a credit card balance from month to month or several late payments on your record, it might make sense to have fewer cards. Having too many could be a temptation to start overspending again.

Do you run a small business? If so, you might want to have a separate credit card just for that business. Using that card for business-related purchases could make it easier to track your business expenses for the year.

Are you building rewards points? Some credit cards come with valuable rewards programs, generating cash-back bonuses or airline miles. If you use your cards properly — paying them off in full and on time each month — having a variety of credit cards can help you earn lucrative rewards.

How does the number of credit cards I have affect my credit score?

The number of credit cards you have, and the way you use them, has a significant impact on your credit score.

Payment history

First, there’s your payment history. FICO says that this factor accounts for 35 percent of your credit score. This means that your history of making on-time, or late, payments has the single biggest impact on your three-digit FICO score. Making your credit card payments on time will improve your score, while making them 30 days or more past your due date will hurt it, no matter how many cards you have.

Amount of debt

The amount of debt you owe also plays a big role in determining your credit score, with FICO saying this factor accounts for 30 percent of your score. Having more credit cards can help with this factor, thanks to something called your credit-utilization ratio.

This ratio measures how much of your available credit you are using. The less you are using, the better it is for your credit score. If you have more cards, your available credit limit is higher, something that will help your credit-utilization ratio.

Here’s how it works: Say you have $3,000 of credit card debt on three credit cards each with a credit limit of $4,000. This means you are using $3,000 of your $12,000 total credit limit, for a credit-utilization ratio of 25 percent. But if you have that same credit card debt of $3,000 and you have five credit cards each with a total credit limit of $4,000, you now have a lower credit-utilization ratio, using just $3,000 of your $20,000 total credit limit for a ratio of 15 percent.

Length of credit history

The length of your credit history accounts for 15 percent of your credit score. Here’s where taking out too many new credit cards in a short period of time can hurt your score. Your score will improve if your sources of credit are older. If you apply for several new credit cards in a short period of time, this will bring down the average age of your credit.

New credit

Your new credit accounts for 10 percent of your credit score. This, again, means that applying for several new credit cards in a short period of time will hurt your score.

Credit mix

Finally, your mix of credit accounts for 10 percent of your FICO score. Your score will improve if you have a range of credit types, everything from credit cards to installment loans to retail accounts. If credit cards make up too much of your credit mix — you have too many cards — your score could take a small hit.

Another tip? Avoid opening new credit accounts if you plan to apply for a mortgage or auto loan in the near future. Lenders might be hesitant to approve your loan application if they see several new credit applications. They’ll worry that you plan to run up a significant amount of debt, and that once you do you’ll struggle to pay your bills on time.

4 benefits of having more credit cards

  1. Receiving more rewards. The more credit cards you own, the more credit card rewards you can potentially earn. Specific perks may include cash back, airline miles, accumulated card points, and hotel and rental car discounts. Typically, the better your credit score, the more likely it is that you’ll be approved for credit cards that offer rewards and other perks. But be sure to keep an eye on card fees. You don’t want the costs outweighing the benefits.
  2. Boosting your credit score by improving your debt-to-credit utilization ratio. By having multiple credit cards, you can spread your balances around instead of loading them up on one card. That’s important, since lower (versus higher) credit card balances (defined in the industry as a credit card “debt/utilization” ratio), are good for your credit health.
  3. Using a separate card for different types of purchases (easier bookkeeping). Cardholders who need to “split” their spending (for instance, between a personal credit card and a business credit card) find it much easier to separate their private and commercial spending into two cards.
  4. Accessing additional credit more quickly in case of emergency. With lower card balances spread out among multiple cards, banks will be more willing to approve a higher card credit limit for you, and that can come in handy for emergency spending.

5 benefits of having fewer credit cards

  1. Easier to manage payments. For some cardholders, simplicity is key with not just their cards, but with their finances. With a single card, you’ll have only one monthly card payment to handle. That can make it easier to focus on paying down the card’s debt on a timely basis, thus improving your credit health.
  2. Less temptation to spend. No doubt about it, having only one card can limit your spending opportunities. That’s a significant benefit for consumers who need all the help they can get to rein in personal spending.
  3. Easier time managing debt because of lower total credit limit. With a single credit card, you’ll have an overall lower credit limit available, thus removing the temptation to overspend. That’s a big deal to younger cardholders, especially those who are trying to save for a new home, pay off college debt, or focusing on boosting their overall credit health.
  4. Easier to apply for a new card when the need arises. Credit card companies are more likely to approve a credit card for applicants who have only one or two cards. To card companies, the lower your overall credit card balance, the lower the risk you’ll default, and thus, the less likely they’ll have to chase you down for payments.
  5. Fewer hard inquiries. Every time you apply for a new credit card, the financial services company offering that card checks your credit. This is known as a hard credit inquiry, and each of these drops your credit score slightly, usually by two or three points. Your score will rise again as you pay your bills on time and reduce your overall debt, but several hard inquiries in a row can add up to a credit score drop of 10 or more points.

How should I choose the number of credit cards I need?

While everyone’s mileage will vary on the number of credit cards carried, there are some numerical “slots” to use as a blueprint when deciding on the ideal number of credit cards.

Number of Cards Scenarios
  • Concerns about overspending
  • Establishing a credit history 
  • Resolving personal financial issues (i.e., paying off college debt or saving for a starter home)
  • Need a “backup card” for emergencies
  • Separate cards for personal and business spending
  • Maintain an excellent, long-term credit
  • Different cards to maximize rewards and benefits based on spending habits 

How do I choose the right credit card for me?

There are plenty of credit cards out there. Which one should you choose? Here are some tips
You’re mostly interested in building a credit history. If you care most about boosting your credit score, consider a basic credit card. Every on-time payment will help increase your FICO score.
You have bad or little credit history. It can be a challenge to get a credit card if you either have a low credit score or you have such a limited credit history you have no credit score at all. You can, though, apply for a secured credit card. These cards have a credit limit that is tied to a deposit you make with the bank issuing the card. Banks are more likely to approve these even for borrowers with bad credit because they already have that deposit from you as a safety net if you stop making your payments.
You want perks. If you’ve established a strong credit score, your odds of qualifying for credit cards with robust rewards programs will increase. You can earn airline miles and cash back with these cards. Just remember, though: Only charge what you can pay off in full each month. Rewards won’t be much benefit if you are running up thousands of dollars of credit card debt.
You run your own business. Many credit card providers offer business versions of their cards. These can make it easier to keep your personal expenses separate from the costs of running your business.
You need to pay off credit card debt. Have thousands of dollars in credit card debt at a high interest rate? Consider opening a new credit card that offers an introductory interest rate of 0 percent on balance transfers. You can then transfer your existing debt to this new card and not have to worry about it growing because of interest. Just make sure you pay off your debt before the 0 percent offer expires. If you don’t, your remaining debt will be saddled with your new card’s regular interest rate.

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