Credit cards are a staple of American life and finances. More than 191 million Americans have at least one credit card, and the average cardholder has 3 credit cards and 2.3 retail store cards.
Plastic is king and quickly replacing cash in most daily transactions. This shift in the mode through which Americans transact begs the question: How many credit cards should I have?
The short answer is that it depends. The long answer is a bit more complicated and depends on a number of factors.
However, how many credit cards you should have begins and ends with you, your habits, and your individual financial situation.
How Will It Affect My Credit?
The first thing you probably think about when it comes to opening new credit card accounts is how having multiple cards will affect your credit and credit score.
While it’s true that each new credit card application will result in a hard inquiry and a likely hit to your credit score, that hit will be temporary as long as you continue to practice good credit habits like paying all your bills on time every month. In fact, the average credit recovery time after opening a new card is just 3 months.
Aside from the initial credit score hit, opening new credit cards can also impact your score in a positive way, granted you use the cards responsibly. This is because your debt-to-income ratio is a major part of the formula that goes into determining your credit score, so the more credit you have available to you the more likely your utilization will be lower.
It is recommended that you keep your debt-to-income ratio below 30% of your available credit. For example, if you have $10,000 total credit available to you and a balance of only $2,500, your utilization is at 25%.
Thus, having multiple credit cards isn’t going to negatively affect your credit and score as long as you keep your utilization below 30% and pay your bills on time every month.
Can I Pay Off My Credit Cards Every Month?
While paying your minimum credit card payments every month is absolutely critical, ideally, you should be able to pay your cards off every month.
Too often, people rely too heavily on credit cards and get into the habit of carrying balances. Although your credit won’t be seriously impacted as long as you make minimum payments, carrying balances can put you in a never-ending debt cycle and negate any rewards you may be earning with your cards.
The average household credit card debt is $5,315, and if you’re not paying your card balance off each month, you’ll be paying high interest payments that will make it hard to ditch that debt for good.
Thus, when deciding how many credit cards you should have, you should first look at the cards you currently have and whether or not you’re able to pay off your balances every month.
If you’re only looking to open more credit cards in order to max them out, then seeking out more credit is a bad idea.
Can I Manage Multiple Credit Cards?
Even if you’re good about paying off your credit card balances every month, the more cards you have the more difficult it can be to manage them all.
One or two credit cards, especially with the same company, are pretty manageable. But, once you open 5, 6, or more different cards, likely with different issuers, it can be a bit harder to track everything and make sure you’re not overstretching yourself.
Only you will be able to determine whether you can manage more cards than you already have, but the key here will be coming up with a system to track and manage everything. Many budgeting apps allow you to connect credit card accounts, which can make tracking your spending much easier.
Another option is to stick to cards issued by the same provider, although that may limit the rewards you can earn.
Do I Need Different Cards for Different Purposes?
Aside from gaining access to more credit, the main reason most consider opening up more credit card accounts is to gain access to cards that serve different purposes.
For instance, those with debt across multiple cards may look to take advantage of balance transfer card offers with lower interest or a 0% interest period. Or, you may want a card with travel protection and no foreign transaction fees if you’re a frequent traveler or travel for work.
However, the main reason most continue to open a new credit card account is for rewards and sign-up bonuses. Credit card churning and travel hacking using credit cards is a major player in helping people travel for less or have access to travel they wouldn’t normally be able to indulge in.
Thus, you may want more credit cards to continue earning sign-up bonuses and to earn rewards to different programs, such as your favorite airlines and hotels.
While opening more accounts to access various rewards isn’t a bad thing, it’s important to understand various card issuer rules around opening up cards and to spread out your acquisition of new cards. Opening up many credit cards in a short amount of time is generally seen as a red flag that may impact your applications.
What Should I Do With Cards I Don’t Need or Use?
The last major factor to consider when answering the question “how many credit cards should I have” is what to do with cards that you no longer need or use.
Especially for those in the points and miles game who regularly accumulate new cards, you’re likely opening most cards to earn the sign-up bonus or cash rewards and then moving on to your next target. While you may have a few staples that you use regularly, many of your cards will only be used while trying to earn the sign-up bonus and then discarded.
As with opening up new credit cards, cancelling credit cards will also likely impact your credit score. Luckily, the impact is rather minimal as it only takes 3 months on average for your credit score to recover to pre-closure levels. However, you should still regularly check your credit score with free tools like Credit Karma to make sure you continue to have a good credit score.
While there is no harm is putting unused cards in a drawer and letting them sit, annual fees can add up quickly. Thus, the main factor to consider when deciding which cards to keep and which to close is whether or not the card has an annual fee, and if it does, whether the card has benefits that balance out the annual fee.
For instance, some rewards credit cards come with free hotel nights or travel credits that make the annual fee more than worth it.
If the benefits don’t outweigh or mitigate the fees, then consider closing the card if it’s not being used. However, consider keeping cards without annual fees in order to extend your credit history.
So…How Many Credit Cards Should I Have?
How many credit cards should I have?
The truth is, you can have as many credit cards as you want. After all, Walter Cavanagh is in the Guinness Book of World Records with a whopping 1,497 credit cards.
The real question is, how many credit cards can you safely manage?
If you can pay your cards off every month and are organized enough to manage multiple cards without getting yourself into trouble, then the only factor limiting the number of credit cards you should have is you.
Just remember to consider the purpose of the credit cards you’re opening, as well as annual fees and other card benefits that will help you determine whether to keep or discard your cards.
How many credit cards should I have? As many as you want and can safely manage.
However, unless you have a stack of cards sitting in a drawer somewhere, most people only actively use 2-4 credit cards and that’s all most will need.
If you’re a card churner, make sure you’re keeping track of annual fees, benefits, and card issuer rules so that you don’t get yourself into trouble or have your applications declined.
On the other hand, if you’re the average credit card user in the United States we’d recommend finding a couple cards that match your spending and desired benefits and stick with them.
Jeff is a fan of all things finance. When he’s not out there changing the world with his blog, you can find him on a run, a Mets game, playing video games, or just playing around with his kids.