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There is no ideal number of credit cards you should have to build and maintain good credit. Using just one or two credit cards properly can help do the trick. And even if you use multiple credit cards, what affects your credit score in the long term is how good you are at managing your debt, for better or worse.
Data released by Experian suggests that Americans had an average of 3.84 credit cards in the third quarter of 2020. However, this does not imply you need that many cards to get a good credit score. Using even two can serve the purpose well. What you mainly need to account for when using your credit cards and the consequent effect on your credit score is your credit utilization ratio. However, maintaining zero balances on all your cards might not be in your best interest.
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Even one credit card, if not used in the right way, can hurt your credit utilization ratio and lower your credit score.
Using multiple cards gives you the means to keep your credit utilization ratio low and maximize your reward earning potential.
Having multiple cards may lead to increased debt, missed payments and a drop in the average age of your credit accounts.
How Many Credit Cards Should You Have for Good Credit?
One important way credit cards affect your credit score is through your credit utilization ratio. This accounts for 30% of your FICO score. Credit utilization ratio refers to the amount of credit you’ve used from your total available revolving credit. For example, if you have just one credit card with a credit limit of $10,000 and have used $5,000, your credit utilization ratio is 50%. From the credit score point of view, it should be lower than 30% and, ideally, less than 10%.
Using two or more credit cards can help keep your credit utilization ratio low, which, in turn, has a positive effect on your credit score. For example, if you have three credit cards with a combined limit of $30,000 and have used $5,000 in all, your credit utilization ratio is 16.66%.
If your existing credit utilization ratio is above the 30% mark, you may get one or more additional credit cards to keep it below 30%. However, consider doing this only if you’re sure you won’t go deeper into debt.
Some people use multiple credit cards with the aim of maximizing their reward-earning potential. In such a scenario, while you need to pay attention to your credit utilization ratio, you also need to take care to pay off your balances in full each month. If you don't, the interest you pay might override the value of the rewards you earn.
Are 3 Credit Cards Too Many?
Even one card can be detrimental to your credit score if you don’t use it in the right manner. On the other hand, if you space out your applications, keep your credit utilization low and make all your payments on time, three credit cards don’t count as too many. When used correctly, they can help you build and maintain a good credit score.
Are 7 Credit Cards Too Many?
This works as a bit of a catch-22 situation. Having less than five credit accounts results in a thin credit file, in which case lenders might not be able to assess the risk they face when giving you credit accurately. On the other hand, lenders might view applicants who have a large number of credit cards with apprehension because multiple open lines of credit might make such borrowers potential liabilities. In addition, applying for multiple credit cards in quick succession brings down your credit score. As a result, seven cards might or might not be too many, depending on how you use them and the benefits you stand to enjoy.
How Many Credit Cards Should You Have to Build Credit?
If you’re a new credit card user, consider using one to two credit cards and paying them off in full each month to build your credit. Moving forward, you may consider adding more cards to your portfolio based on the specific perks or benefits you wish to enjoy. You’ll want to focus on keeping your credit utilization ratio low throughout, though.
If you have multiple credit cards, you need to ensure that you make all your payments on time. This is because even a single missed or late payment can bring down your credit score. Setting up an automatic payment of the minimum amount due ensures that you won't miss a payment and that you'll avoid late fees. Your payment history accounts for 30% of your FICO score.
If you feel you have more cards than you can effectively manage, think twice before closing any of your old accounts. Doing so brings down the average length of your credit accounts, which can also hurt your credit score. This aspect accounts for 10% of your FICO score.
Consequently, how many credit cards you should have to build credit boils down to how effectively you can manage your debt. To move from good credit to excellent credit, you need to build your credit file, make timely payments, keep your credit utilization ratio low, limit how often you apply for new credit and add some variety to your credit mix. The last aspect involves getting other forms of credit such as student loans, personal loans, auto loans and mortgages.
If you wish to get a credit card to build credit, narrow down on those you may qualify for based on your existing credit score. Then, choose a suitable option after accounting for factors such as annual fees, APRs, benefits and rewards. We have analyzed over 1,600 consumer credit cards so that you can select one with ease.
Is It Bad to Have a Lot of Credit Cards With Zero Balances?
When played right, it’s not bad to have multiple credit cards with zero balances. In fact, this can actually lower your credit utilization ratio and help improve your credit score. Consider this example. You have one credit card with a credit limit of $10,000 and have used $4,000. You also have three other cards with credit limits of $10,000 each, all of which have zero balances. With a combined credit limit of $40,000, your credit utilization ratio is 10%. Compare this with having just the first card, in which case your credit utilization ratio would be 40%.
There are also possible drawbacks of having multiple credit cards with zero balances.
If you leave a credit card with a zero balance inactive for a prolonged period, its issuer may close the account or reduce your credit limit. This might increase your credit utilization ratio. If the closed account is old, it can bring down the average length of your credit history. In both cases, your credit score may take a hit. In some cases of account inactivity, credit card issuers simply stop sending updates to credit bureaus.
Another possible problem with having zero balances on many credit cards is that potential lenders might not be able to get a clear picture of how well you manage your credit. What they like to see is if you borrow money and then repay it in a responsible manner.
While you don’t need to carry balances on your credit cards, it’s a good idea to use them occasionally and pay the balances off before they start accruing interest.
What Are the Perks to Having More Than One Credit Card?
The benefits of having more than one credit card come in different forms, from improving your credit score to giving you access to rewards and added perks.
- Build credit score: Making timely payments toward all your credit cards reflects in the payment history of your credit reports, and this has a positive effect on your credit score. In addition, you may also expect your credit score to benefit if you keep your credit utilization lower than 30%. For example, if you have just one credit card and a credit utilization ratio of 60%, you may bring it down to the desired level by getting a new card and not adding more debt.
- Earn rewards: You may choose to get more than one credit card with the aim of capitalizing on your spending. For example, you may want to get a gas rewards card to earn more rewards on gas purchases and a cash back card to simplify how you earn rewards on other purchases. You may also choose from cards that offer spend-based welcome bonuses and ones that offer high reward rates on other bonus categories such as travel, dining and groceries.
- Benefit through added perks: If you are loyal to any particular airline or group of hotels, you may get co-branded credit cards that offer perks such as free nights, complimentary breakfasts, complimentary companion flight tickets, airport lounge access, priority boarding and travel insurance coverage. Several non-co-branded travel cards offer similar benefits as well.
What Are the Drawbacks of Having Multiple Credit Cards?
The potential drawbacks of having multiple credit cards require your attention because when not managed right, they can have an adverse effect on your creditworthiness.
- Applying too often: Your credit score drops by a few points every time you apply for a new credit card. If you plan to use multiple credit cards, try to space out their applications by at least six months.
- Missing due dates: Managing multiple credit cards can be challenging, given that they tend to come with different due dates. Even if you miss a single payment or make a late payment by mistake, it will reflect on your credit report and bring down your credit score.
- Building debt: Having multiple credit cards brings with it the risk of building more debt. Ideally, you should strive to pay off your balances in full each month to avoid interest charges. If that’s not possible, you should keep your credit utilization ratio below 30% and refrain from getting to a stage where you have problems repaying your debt.
- Reducing the average length of credit: If you have multiple credit cards and wish to close old accounts you no longer use, you might want to rethink your strategy. Closing old credit card accounts reduces the length of your credit history, and this has an adverse effect on your credit score. If your old credit cards come with no annual fees, consider using them from time to time to keep them active. The average length of your credit also drops every time you add a new card to the mix.
Having multiple credit cards allows you to maximize the rewards earned on your spending and the benefits received from each card. Additionally, extra cards make it easier to keep personal and work- or business-related spending separate for reimbursement and taxes. — Lee Huffman, credit card expert at BaldThoughts.com
Other Questions You May Have About Cards for Good Credit
Learning the answers to other commonly asked questions about how many credit cards one should have will give you a better sense of how many might work well in your situation.
Now that you know what a good amount of credit cards to have is based on your specific circumstances, consider if you need to apply for a new one or more. If you decide to get a new card, compare your options across parameters such as the categories of cards on offer, rewards, annual fees, APRs and added benefits.
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About Rajiv Baniwal
- Experian. "What Is the Average Number of Credit Cards per US Consumer?." Accessed February 9, 2022.
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