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How Many Credit Cards Should I Have?

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.

There are so many amazing credit card offers that it is easy to go overboard and apply for them all. But before you jump into the deep end of travel rewards, you need to ask yourself how many cards you should have.

The answer will change from person to person, depending on their needs. But in general, you’ll want to have an airline card, a hotel card, and a cash back card.

How Do Credit Cards Affect Your Credit Score?

As great as some card benefits are, you don’t want to harm your credit score by applying for too many. Credit cards affect your credit score in all five of the main factors:

  • Payment history (35%) – make sure that you pay at least the minimum due each month. I set up an automatic payment of the minimum on each account to ensure I never miss one.
  • Amounts owed (30%) – keep the amount owed as low as possible compared to your credit limit. Increase your limits or make multiple payments each month to keep your utilization low.
  • Length of credit history (15%) – every time you open a new account it lowers the average age of your credit accounts. Keep no-fee credit cards open to boost your average length of credit history.
  • Credit mix (10%) – lenders want borrowers to have a mix of active credit accounts on their report. It is good to have credit cards, a mortgage, and an installment loan if you want a higher credit score.
  • New credit (10%) – each inquiry on your credit will lower your score by an average of 3 to 5 points for approximately 6 to 12 months. Keep your inquiries to a minimum and space out your applications to reduce their impact.

Your credit score is affected when you apply for a new credit card. But, how you handle the responsibility of using a card is an even more important factor in your credit score.

Do Too Many Credit Cards Hurt Your Credit?

Yes and no. If you apply for too many cards in a short period of time, your credit score will be hurt in two ways. With each inquiry dropping your score 3 to 5 points, multiple inquiries could reduce your score in a big way.

And when you are approved for the new cards, those fresh accounts will lower your average age of accounts. This impact could be small or large depending upon how many other open accounts you have and how old they are.

Having multiple cards can also improve your score as long as they are used responsibly. As you can see above, payment history and your balances owed (also known as credit utilization) make up 65% of your credit score. When you make your payments on time and keep your balances low, this is the kind of customer that banks like to approve.

Most importantly, if you have too many cards open and are not organized, it is easy to miss a payment. That missed payment will be a negative mark on your credit report and could stay on your report for 7 to 10 years.

Is It Bad To Have A Lot of Credit Cards With Zero Balance?

Not at all. Many experts recommend keeping your credit utilization below 30% to achieve a high credit score. Ideally, your balances should be kept below 10% for the highest scores.

Credit scores are based on both your individual card utilization and your overall utilization. If you are carrying balances on your other cards, the zero balance cards help to lower your overall utilization.

Should I Close Unused Credit Cards?

Although it seems reasonable that you should close an unused account, doing so could harm your credit. I made this mistake in my 20s after I paid off some debt. I didn’t want that to happen again, so I closed several credit card accounts. One phone representative warned me of the consequences, but I thought that I knew better.

Sure enough, the customer service agent was correct. About a month after I closed those paid off credit cards, my credit score declined because I had eliminated those credit limits. This caused my credit utilization to increase, which reduced my credit score.

How Many Credits Cards Should I Have?

The number of cards you should have is really a personal decision. I have friends who are happy with just one card, while there are people like me who have over 40 cards open. My recommendation is to have at least three cards. One for your favorite airline, another for your favorite hotel, and a third for cash back.

Remember, though, that it is important to stay organized and keep track of your accounts. The more cards you have, the easier it is to miss a payment or to experience fraudulent activity on one of your accounts.

How Many Credit Cards Does The Average Person Have?

According to a study by CreditKarma, the average American has 4.73 credit cards. This number includes members who do not have a card, so the number could be skewed lower because of that.

This number also includes store credit cards, which can only be used at selected merchants. For example, if you have the Best Buy store card, it can only be used to buy something at Best Buy.

Five Reasons Why You Should Have Multiple Credit Cards

I’m a firm believer that people should have multiple credit extensions. There is no credit card that works best in every situation. Some credit cards are missing important perks, while others are poor at earning valuable rewards.

Beyond the perks and ability to earn rewards, it is important to have multiple credit cards for other reasons.

To Avoid Interest On Purchases

When your goal is to earn rewards and perks, the number one rule is to avoid carrying a balance. No rewards are worth the high-interest rates that you’ll pay when you cannot pay off the balance in full each month.

If you need to carry a balance on one card, having other credit cards allows you to spend without incurring interest on those purchases. My recommendation is to do a balance transfer to a 0% interest promotion to minimize the interest you pay and accelerate the payoff of that debt.

Banks Can Reduce Limits And Close Accounts

Banks’ appetite for risk changes based upon the economy and many other factors. When you have only one card (or even multiple cards with the same bank), you are at risk. If the bank decides to reduce your limits or close your accounts, you will lose access to your credit limits.

You can minimize this risk by having cards from different banks. American Express, Chase, Citibank, and many others offer attractive cards that you should consider as you diversify your wallet.

Maximize The Benefits

When you have multiple cards, this is a great opportunity to maximize the benefits when traveling. Cards like The Platinum Card® from American Express offer lounge access which make waiting for your flight much more enjoyable.

And getting through the airport security lines can be a breeze when you use the Global Entry or TSA PreCheck reimbursement from cards like the Capital One Venture Rewards Credit Card. I have several credit cards that offer this benefit, so everyone in my family of four has Global Entry and TSA PreCheck.

Earn Elite Status Before Your First Hotel Stay

I love hotel credit cards for multiple reasons. The first is that most offer elite status before you’ve spent one night in their hotel. And when you pay the annual fee each year, many offer a free night at their hotels that is worth more than the fee you paid.

Most hotel brands offer multiple personal and business credit cards to choose from. My favorites that offer the best perks are from Hilton, Hyatt, IHG, and Marriott.

Save Money When You Fly

The cost of flying isn’t always limited to the price of the ticket that you bought. Airlines now like to charge travelers for services that used to be free. For example, checked bags can now cost up to $30 each way! But, when you have the airline’s credit card, you can check your bag for free and receive priority boarding as if you had elite status.

The Bottom Line

There’s no magical answer when you ask yourself how many credit cards you should have. However, you need to take it slow and apply for new credit cards over time to maintain your good credit score. As you gain more experience with travel rewards and cash back credit cards, I recommend that you add new cards to receive new benefits like free hotel nights, priority boarding, and airport lounge access.

How many credit cards do you have? Have you opened up a credit card just for the perks? Let us know in the comment section below.

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Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.
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