How Many Credit Cards Should You Have?


05/21/2024 · 2 min read

The optimal number of credit cards for an individual varies based on personal financial habits and needs. There isn't a one-size-fits-all answer. However, there are several factors to consider when determining the right number of credit cards.

Having multiple credit cards can be beneficial for several reasons. Firstly, it allows for diversification of credit. Different cards offer different benefits, such as cash back, travel rewards, or low-interest rates. By possessing a mix, an individual can optimize the rewards and benefits they receive based on their spending habits. Additionally, having more than one card can help in emergencies when a primary card gets declined or lost.

Another benefit of having multiple cards is the potential positive impact on one's credit score. Part of the credit score calculation is the credit utilization ratio, which compares the amount of credit used to the total credit available. By having more credit available across multiple cards and maintaining low balances, one can keep their credit utilization ratio low, which can be beneficial for the credit score.

However, managing multiple credit cards also comes with its challenges. It can be easy to lose track of spending when using several cards, leading to potential overspending. Multiple cards also mean multiple bills, and missing payments on any one of them can negatively impact a credit score. Furthermore, each time you apply for a new credit card, a hard inquiry is made on your credit report, which can temporarily lower your credit score.

For some, just one or two credit cards — perhaps one for everyday purchases and another for emergencies — might be sufficient. For others, especially those who manage their finances closely and want to maximize rewards, having several cards can be beneficial. It's essential to strike a balance based on individual needs and financial management capabilities. Regularly reviewing one's credit report, setting up payment reminders, and monitoring spending are all good practices, regardless of the number of cards one chooses to have.