Credit cards are a great way to make purchases more convenient. Having one credit card is often enough, but different credit cards can serve different spending habits, such as travel rewards cards for frequent travelers. But can you have too many credit cards?
Learn how having credit cards can impact your financial health as well as how many credit cards may be considered “too many” for your circumstances.
Having multiple credit cards can indirectly affect your credit score in both positive and negative ways. The real key is understanding how to manage your credit cards responsibly.
How Credit Utilization Affects Your Score
One of the biggest factors in your credit score is your credit utilization ratio, This is the amount of credit you’re using compared to your total available credit limits across all your accounts
Generally, experts recommend keeping your credit utilization below 30%. The lower the better for your credit score.
Here’s an example:
- You have 3 credit cards with the following limits:
- Card 1: $5,000 limit
- Card 2: $3,000 limit
- Card 3: $2,000 limit
- Your total available credit across the 3 cards is $5,000 + $3,000 + $2,000 = $10,000
- You currently have $2,000 in balances split across the 3 cards
- Your credit utilization is $2,000 (your balance) / $10,000 (total available credit) = 20%
In this example, your utilization of 20% is great for your credit score.
Now let’s say you open a 4th credit card with a $5,000 limit. Your total available credit is now $15000. With the same $2,000 balance across your cards, your new utilization is $2,000 / $15000 = 13%. Opening that new account brought down your utilization, which helps your credit score.
So in that sense, having multiple credit cards can benefit your score indirectly by allowing you to maintain a lower credit utilization. Just make sure you’re not spending more just because more credit is available!
Too Many Credit Inquiries Can Hurt
When you apply for new credit, the lenders check your credit report. This results in a “hard inquiry” on your credit file. Too many inquiries in a short period of time can negatively impact your score.
Why? Because it can look like you’re being overly aggressive in seeking new credit. Spread out applications over time to avoid this issue. A good rule of thumb is no more than 2 or 3 credit applications over 12 months.
Also, it’s smart to compare rates across multiple lenders when shopping for a major loan like a mortgage or auto loan. Credit scoring models understand this shopping behavior, and multiple auto or mortgage inquiries over a short period count as a single inquiry rather than multiple hard inquires.
So inquiries only become an issue if you’re applying for a lot of new credit in a short period of time.
Missed Payments Hurt Your Credit History
Having multiple credit cards makes it more challenging to keep track of bill due dates and make payments on time. Even being a few days late can result in fees and negative marks on your credit reports.
Payment history is the biggest factor in your credit score, so those late payments can really damage your credit. Set up automatic payments or payment reminders when possible to avoid issues.
Tips for Managing Multiple Credit Cards
If you want to open new credit card accounts, take it slow and steady. Only open an account if it makes financial sense for your situation. Avoid applying for multiple cards at once.
Here are some tips for managing multiple cards:
- Automate payments to avoid late fees and credit score damage
- Use automatic balance alerts to stay on top of your balances and credit utilization
- Consolidate higher interest debts onto 0% balance transfer cards to save on interest
- Focus on paying down cards one at a time to keep your overall utilization low
- Check your credit reports to make sure new accounts are being reported accurately
- Set reminders for annual fees and card expirations so you can decide whether to keep or cancel the card
The number of credit cards you have is secondary to how responsibly you manage those accounts. It’s definitely possible to have excellent credit with multiple cards open, provided you use them wisely!
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How Many Cards Should You Carry?
The number of credit cards you have and how you use them can have a direct impact on your credit score.
If youre a new credit card user, you can focus on building a credit history with one or two cards and pay off your balance in full each month. Adding credit cards for specific purposes, such as a good rewards program or better travel-related benefits, can also make sense, provided you add them gradually over time rather than all at once. The effects of adding new cards is minor compared to your payment history and credit utilization, however.
If youve used credit cards for several years and sometimes carry a balance, it may make sense to add a card if it has a significantly lower interest rate. You may also want to transfer a balance to a new card that offers a promotional 0% APR for new cardholders. However, you still need to focus on keeping your debt-to-credit ratio as low as possible.
In general, its often good to have a primary card that you use for most spending and maybe one or two as a back-ups or for specialized purposes (such as for a particular spending category that is rewarded with extra bonus points).
That was the average number of credit cards per U.S. consumer in 2023, according to the credit reporting agency Experian.
How Many Credit Cards Is Too Many?
If you think you may have too many cards or have some you no longer use, you may be tempted to start closing accounts, but consider the impact on your credit score. Closing older credit cards can eventually shorten your credit history, which can hurt your score.
Payment history on closed accounts eventually falls off your report, which can also hurt your score. Closing credit card accounts also reduces your amount of available credit, which can hurt (i.e., increase) your credit utilization ratio if you have outstanding balances.
Its better to leave your credit card accounts open and just put these cards away, unless youre paying annual fees. If you get a warning about inactivity from the card issuer, use that card now and then to prevent the account from being closed. You can also keep that credit card as a backup, especially if it comes with a higher credit limit.
Another option for an older credit card you no longer use—and may have gotten when you were just starting out and didnt have many choices—is to ask the issuer about trading up to a better product, rather than closing the account outright.
Can HAVING too MUCH CREDIT HURT YOU? | How MANY CREDIT CARDS Should You Have?
FAQ
Is having too many credit cards bad for credit score?
How multiple credit cards affect your credit score. Having multiple credit cards can indirectly impact your credit scores by lowering your debt to credit ratio—also known as your credit utilization rate. Your credit utilization rate is the amount of credit you use compared to the total credit available to you.
Is 7 credit cards too many?
What is the 2/3/4 rule for credit cards?
How many credit cards should I have for an 800 credit score?
“Three or four is a good number for a lot of people, but you can build credit with as little as one,” Rossman said. Research from Experian found U.S. consumers carried 3.9 credit cards on average in 2023 — down from 4.2 in 2017. But Americans with exceptional FICO scores — 800 to 850 — had 4.8 credit cards on average.