Credit cards have an impact on your credit score and your ability to receive a loan for big purchases like a home. There are several factors such as whether you revolve a balance, how much credit you use versus the limit, and making your payments on time that affect your credit.
So you might have wondered about how many credit cards should you have? How many credit cards is too many that it starts to negatively impact you. There isn’t a magic number of credit cards that a person should have.
It really depends on your personal financial situation and your goals as to how many credit cards you should have. Let’s walk through different factors that can guide you on the right number, how multiple credit cards impact your credit, and what to watch out for. But first, we’ll look at how many credit cards the average person has and what we can learn from people who have high credit scores.
How Many Credit Cards Does the Average Person Have?
Experian’s 2019 Consumer Credit review found that the average number of credit cards a person has is four. This is up from 3.04 credit cards that Experian’s State of Credit report found for 2018. With economic conditions improving for many, people are more confident about being able to pay and have more credit cards.
Experian also reported that 59 percent of Americans have a 700 or more FICO(R) credit score. Lenders consider people with credit scores of 700 and higher to be favorable borrowers. The interest rates on credit products are lower and the chances of being approved for a loan are higher for those who are in this range.
How Many Credit Cards Do People With Good Credit Have?
Now you’re probably wondering how many credit cards do these people who have good credit have. Experian’s report also reveals that people who have a FICO(R) credit score of 785 or higher have an average of seven credit cards.
These seven cards are a combination of both open and closed cards. It also includes accounts that have balances and those that don’t. In fact, four out of the seven credit cards of these high achievers have a balance.
This information doesn’t mean that that you should have at least seven credit cards open. There are a lot of reasons why these high achievers have such high credit scores.
For instance, these people have an established and long credit history. The average credit account of a FICO(R) high achiever is 11 years old. They don’t open up new credit card accounts that often.
What Are the Benefits of Having Multiple Credit Cards?
There are definitely benefits to having multiple credit cards as long as you are using them responsibly. One of the biggest benefits is that you can take advantage of multiple rewards programs.
There are credit cards that offer cashback rewards that you can redeem for statement credit or direct deposited into your bank account. Other cards offer travel perks that allow you to access discounted or even free airline tickets, hotel stays, and more. This is particularly a benefit for someone who travels often for work,
These types of rewards aren’t able to be received from one credit card. So having multiple cards that give you access to different types of rewards is how you can get access to them.
To help separate your expenses, multiple credit cards can be the answer. For example, you may use a certain card for all your gas and grocery expenses. Or all of your work-related expenses could be designated to one card.
Having multiple credit cards can also be beneficial when you are looking to purchase your first home. You generally need at least three trades on your credit report when applying for a mortgage loan. Credit cards and loan products are considered trades.
How Many Credit Cards Should I Have if…
You should only have as many credit cards as you are able to handle your situation. At a minimum, you should at least have two credit cards. These credit cards should be on different networks. The four major networks are Visa, Mastercard, American Express, and Discover.
Almost all merchants accept either a Visa or Mastercard. American Express and Discover have also grown their merchant acceptance over the past two decades. Still, there are some circumstances where a merchant doesn’t accept a certain network. One example is Costco who will only take payments from Visa cards.
You should also have different rewards on these credit cards. Credit cards offer cashback, reward points, miles, and other reward platforms. This mix of rewards should cater to what you benefit you want. Now, let’s look at some more specific scenarios and how many credit cards you should have based on them.
You are just starting to build credit
When you are new to credit cards and beginning to build your credit, start by opening one credit card. As you grow your confidence in using it and are practicing good credit habits (making on-time payments and paying off your full balance), then you can add another credit card to your wallet.
It is a bit challenging when you are just starting to build your credit to find one that you can get approved for. Secured cards are an option in these cases. They have a limited credit limit which you typically must pay up-front. Some have annual fees and generally don’t offer a rewards program.
Another option is searching for credit cards that cater to those with little or no credit history. You might be able to find one that offers a rewards program, although it will probably offer a basic structure (i.e. 1 percent cash back on everything)
You are trying to repair your credit history
If your goal is to improve your credit score, getting a new card is not the answer. Opening up a new credit card will temporarily lower your credit score. And depending on your credit, you might not be approved.
Instead, you should remain in a holding pattern until your credit is improved. Focus on paying down your debt as quickly as possible and making all your payments on your accounts on-time.
You are planning to buy a new house soon
Even if you’re six months away from entering the housing market, you should avoid opening a new credit card. Instead, stick with how many you have until after you’ve closed on a new home. The impact of your credit score lowering temporarily when opening a new card could cost you from receiving the most favorable mortgage terms.
The hard inquiry that opening up a new credit card may not recover before you submit your mortgage loan application. That’s why its best to play it safe and have your finances in the best shape possible when it’s time to get a mortgage loan.
How Many Credit Cards is too Many?
So many credit cards exactly are too many to have? The answer is that it depends. There’s not a blanket answer that’s going to be right for you, your co-workers, family, and friends.
It’s going to depend on your individual financial situation and what is currently going on with your credit. For example, a person might have 750 credit score, five credit cards that you don’t carry a balance on any of them. Another person might have a 650 credit score and also five credit cards. However, they are revolving a high balance on three of those cards and have missed a payment in the last few months.
In these scenarios, each of the individuals has the same number of credit cards. But their financial situations differ and it appears that the latter person may have more credit cards than they should.
How Does Having Multiple Cards Affect Your Credit Score?
When you have multiple credit cards, your credit score can be affected by certain activities. The impact could be the opposite of what you are hoping to accomplish. What you need to consider before performing one of these activities is below.
Opening a New Account
First, let’s say you want to open a new credit account. To open this new credit card, the issuer must do a hard pull on your credit to review your credit report and score. Based on this information, they will decide if they will approve your application.
Generally, when a hard inquiry on your credit is performed, it will lower your credit score by several points. It will take a few months for your credit to regain the points it lost from the original hard inquiry. This is the case as long as you have been practicing good credit habits like paying your bill on time.
Now if you submit credit card applications frequently, the negative impact on your score is much greater. Only apply for a credit card when you want one to accomplish a certain financial goal. If you are applying for one or two on a monthly basis, it could look like you’re fishing for credit, which will deter credit card issuers and lenders.
Closing an Existing Account
Even if you close an existing credit card account, it will stay on your credit report for up to ten years. That’s even if that account didn’t have a late payment or other derogatory mark.
The average age of your accounts could also decrease once that closed account is dropped from your credit report. Having a higher average age of your accounts is generally better for your credit history.
Another potential effect of closing an account is that it could increase your credit utilization rate and lower your credit score. We’ll look more specifically at credit utilization below.
Credit Utilization Rate
Credit utilization measures the amount that you owe on all your revolving accounts like credit cards and divides it by your total available credit. It is expressed as a percentage. is generally recommended to be no more than 30 percent of available credit on a credit card.
Let us look at an example to help illustrate how credit utilization works. Let’s pretend that you have three credit cards that have a total balance of $1,000 and a total credit limit of $2,000. That’s a 50 percent credit utilization. If you close one of those credit cards that doesn’t have a balance, you now have a total credit limit of $1500 which increases your credit utilization to 66.67 percent.
Your credit utilization was already higher than the recommended 30 percent in the beginning. Closing one of your credit cards has increased it further and will likely negatively impact your credit score.
Potential Issues of Having Multiple Credit Cards
Having multiple credit cards could cause you problems if you aren’t prepared to manage them responsibly. Let’s look at some of these issues that could arise from having multiple credit cards.
More Credit Card Fees
Some credit cards have annual fees that must be paid to have them. Credit cards that offer high-value travel perks like frequent flyer miles often have annual fees. It’s common to pay $95 a year for these types of credit cards.
That fee is only worth paying if the benefit you receive is greater. That could mean spending a high minimum amount on the credit card or purchasing several trips each year. If that’s not the case, then that fee will actually end up costing you more than the perk of the credit card is worth.
More Difficult to Maintain
When you have multiple credit cards, you will have multiple due dates. This could make it easier to forget to make payments. You could set up automatic payments to keep you from missing a payment.
However, it could still be difficult to manage your money and track your spending. You could end up not having enough in your checking account to cover a due date and get charged an overdraft fee by your bank.
Could End Up Spending More Money
Your monthly spending could go up because you may perceive that you have more money to spend. Having purchases spread across multiple cards can look manageable until you add them all up.
Then if you carry a balance, you will be paying interest on some of those purchases. You can end up spending just as much on interest as some of those purchases cost you.
The number of credit cards that’s right depends on your situation. You should be confident in your ability to manage however many cards that end up being whether it's two or ten. Being able to practice good credit habits like paying your credit card on time and in full should be achievable.
About the Author
Anjana Paul is a banking professional who is passionate about helping others make better choices when it comes to money. In her spare time she is a freelance writer with years of expertise in the financial industry. She primarily writes about topics such as student loans, building credit, budgeting, retirement and other personal finance topics.