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There's no "one size fits all" when it comes to the number of credit cards you should have in your wallet. How many credit cards you should have depends on many factors, such as your spending habits, desire for rewards, financial responsibility and willingness to pay annual fees.
How to Decide How Many Credit Cards You Need
Figuring out how many credit cards you need may be different from figuring out how many you want. While you likely can get by without any credit cards, if you want to maintain and build a good credit history, having at least one credit card can definitely come in handy.
First, you'll want at least one credit card so you can establish a record of managing a revolving credit account in your credit file. Your credit mix—which accounts for 10% of your FICO® Score* —is based on how many different types of accounts you have (revolving and installment), and the more diverse your credit file, the better your chances of having good credit scores.
Using just one credit card responsibly—by spending within your means and paying your bill on time—can also fill your credit report with positive information. Each time you pay your bill on time, a record of the payment is reported to one or more of the three major credit bureaus (Experian, TransUnion and Equifax). Your payment history is the most important factor in your credit scores, and missing even one card payment could have a negative impact on your scores. So the more on-time history you have, the better.
While you can probably get away with just one credit card, there are a few reasons you might want to get more than one—as long as you spend responsibly and pay all your bills on time.
Multiple credit cards can help with your credit utilization ratio, or amount of available credit you're using—which is a key component of your credit scores. Credit utilization is calculated by dividing your total credit card balances by your total card limits. Staying under 30% utilization will help you avoid hurting your credit scores, and keeping your ratio at 6% or under will help you achieve top scores. If you have more than one credit card, you'll also have a higher overall credit limit—which can help keep your utilization ratio at a good level.
Having more than one card may also help you earn valuable rewards. Some cards offer rewards for travel purchases, while others offer points or cash back for spending at restaurants, supermarkets and various other retailers. Juggling multiple cards can be tricky, so this strategy only works if you spend within your means and pay all your bills on time.
How Many Credit Cards Is Considered Too Many?
There is no rule on how many credit cards is too many. It will vary by whether you are spending too much, can manage all your payments, can afford all the annual fees (and are sure they're worth it) and are getting good value from each card.
If you can't keep up with all your monthly payments, it's a good sign that you're spending beyond your means on your cards. Consider not using all of your cards and leaving one or more of them at home so you don't get tempted to spend more than you should.
Another way to determine whether you have too many credit cards is to add up all the annual fees associated with each to see if the cost of having multiple cards outweighs the benefits you get from using them. If so, consider downgrading one of your cards to a product that doesn't charge annual fees. Closing accounts can hurt your credit scores by lowering your utilization ratio and shortening the length of your credit history, so try to find an alternative before shutting an account forever.
When Does It Make Sense to Get Another Credit Card?
Adding a new credit card to your wallet can be a good move if you're looking to earn new rewards, want to transfer a balance to a lower interest card, or are looking to lower your utilization ratio.
If you're planning a trip, for example, you may want a credit card that offers great travel rewards. In this case, consider applying for a card that offers an introductory bonus you can redeem for travel or hotel stays. The Chase Sapphire Preferred® Card, for example, offers approved applicants 60,000 bonus points after spending $4,000 on eligible purchases within the first 3 months of opening the account. Those points are worth $750 if redeemed through the Chase Ultimate Rewards travel portal.
Getting a new card may also help you save on high interest payments. Balance transfer cards allow you to move high interest card balances to a low or even 0% annual percentage rate (APR) card for a set period of time. The Citi® Double Cash Card - 18 month BT offer, for instance, offers an introductory 0% for 18 months on balance transfers APR. After that, the rate is 15.49% – 25.49% (Variable). It has no annual fee and also offers 2% cashback on every purchase—1% as you spend and 1% as you pay your bill.
Drawbacks of Owning too Many Credit Cards
While getting a new card every few years will not have a large impact on your credit, if you add too many in a short period of time, your scores could suffer. Too many credit card applications in a short period of time will result in multiple hard inquiries. These inquiries are recorded every time you apply for new credit and they remain a part of your credit reports for up to two years. When too many of them occur in a short period of time, they can negatively impact your credit scores. (The only exception is when you are rate shopping for a specific type of loan, such as an auto loan, over a short period of time.)
Another drawback of having multiple cards is that it may become difficult to track your spending. Even if you're not spending too much, if you use more than one card each month and forget to pay one of your bills, your credit scores will suffer.
Finally, having multiple credit cards may entice you to spend more than you can afford. For some people, this isn't a problem. But if you're prone to overspending, consider this tendency before applying for any additional cards.
To learn more about your credit limits and to see what credit cards you currently have, consider getting a free copy of your Experian credit report and FICO® Score to see what's in your credit file. And if you decide to apply for a new credit card, check out Experian CreditMatchTM, which pairs you with personalized offers based on your credit file.