If you’re like me, you probably have a wallet full of plastic cards that you use for different purposes. Maybe you have one for everyday spending, one for travel rewards, one for cash back, and one for emergencies. Or maybe you have just one card that does it all. But how many credit cards should you really have? And how does having more or less cards affect your credit score, your finances, and your lifestyle?
There’s no simple answer to this question, as different people have different needs and preferences when it comes to credit cards. However, there are some general guidelines and factors to consider when deciding how many credit cards to have. In this blog post, I’ll share with you some of the pros and cons of having multiple credit cards, as well as some tips on how to manage them effectively.
The Benefits of Having Multiple Credit Cards 💳
Having more than one credit card can offer you several advantages, such as:
- More rewards and perks. Different credit cards offer different types of rewards and benefits, such as cash back, points, miles, discounts, insurance, and more. By having multiple cards, you can maximize your rewards by using the best card for each purchase category. For example, you can use a card that gives you 5% cash back on groceries for your supermarket trips, and a card that gives you 2x miles on travel for your flights and hotels. You can also enjoy perks like free checked bags, airport lounge access, rental car coverage, and more with certain cards.
- More available credit. Having multiple credit cards means having a higher total credit limit across all your accounts. This can help you lower your credit utilization ratio, which is the percentage of your available credit that you use. Credit utilization is one of the most important factors in your credit score, and keeping it below 30% (or ideally below 10%) can boost your score and make you more attractive to lenders.
- More flexibility and convenience. Having multiple credit cards can give you more options and backup plans in case of emergencies or unexpected expenses. For example, if one of your cards gets lost, stolen, or declined, you can use another card instead. Or if you need to make a large purchase that exceeds the limit of one card, you can split it across two or more cards. You can also use different cards for different purposes, such as online shopping, bill payments, subscriptions, etc.
The 😬
Having more than one credit card can also have some disadvantages, such as:
- More fees and interest. Having multiple credit cards means paying more annual fees, late fees, interest charges, foreign transaction fees, and other fees associated with each card. These fees can add up quickly and eat into your rewards and savings. If you carry a balance on multiple cards, you’ll also pay more interest and potentially hurt your credit score.
- More complexity and hassle. Having multiple credit cards means managing more accounts, statements, due dates, passwords, and customer service contacts. This can be confusing and time-consuming, especially if you don’t have a system to keep track of everything. You’ll also have to remember which card to use for which purchase to optimize your rewards and avoid fees. If you’re not organized and disciplined with your finances, having multiple credit cards can be overwhelming and stressful.
- More temptation and risk. Having multiple credit cards means having more opportunities to overspend and get into debt. If you have a lot of available credit, you might be tempted to buy things that you don’t need or can’t afford. This can lead to high balances that are hard to pay off and damage your credit score. You’ll also be more exposed to fraud and identity theft if you have more cards that could be compromised.
How Many Credit Cards Should I Have? 🧐
As you can see, there are pros and cons to having multiple credit cards. The optimal number of cards for you depends on your personal situation and goals. However, here are some general tips to help you decide:
- Start with one or two cards. If you’re new to credit or have a low credit score, it’s best to start with one or two cards that suit your needs and spending habits. This will help you build your credit history and score gradually without overwhelming yourself with too many accounts.
- Add more cards as needed. As your credit improves and your financial situation changes, you might want to add more cards that offer better rewards or benefits for your lifestyle. For example, if you travel frequently or plan to buy a house soon, you might want to get a travel card or a card with a low interest rate.
- Don’t apply for too many cards at once. Applying for too many credit cards in a short period of time can hurt your credit score, as each application generates a hard inquiry on your credit report. Hard inquiries can lower your score by a few points and stay on your report for two years. Therefore, it’s best to space out your applications and only apply for cards that you really want and need.
- Don’t close your old cards. Closing your old credit cards can also hurt your credit score, as it reduces your available credit and your average age of accounts. Both of these factors are important for your credit score, as they show your creditworthiness and stability. Therefore, it’s best to keep your old cards open and active, unless they have high fees or negative effects on your finances.
How to Manage Multiple Credit Cards Effectively 🙌
If you decide to have multiple credit cards, here are some tips on how to manage them effectively:
- Pay off your balances in full every month. This is the golden rule of credit card use, as it helps you avoid interest charges, fees, and debt. It also helps you maintain a low credit utilization ratio and a high credit score. To make sure you don’t miss any payments, you can set up automatic payments or reminders for each card.
- Use a budgeting app or spreadsheet. A budgeting app or spreadsheet can help you keep track of your spending, income, and balances across all your cards. You can also use it to plan your purchases and allocate your payments according to your priorities and goals.
- Use a rewards tracker or optimizer. A rewards tracker or optimizer can help you maximize your rewards by telling you which card to use for each purchase category or merchant. You can also use it to monitor your rewards balances and redeem them for the best value.
- Review your statements and credit reports regularly. Reviewing your statements and credit reports regularly can help you spot any errors, fraud, or identity theft on your accounts. You can also use them to analyze your spending patterns and identify areas where you can save money or earn more rewards.
Conclusion 🎉
There’s no definitive answer to how many credit cards you should have, as it depends on your personal situation and preferences. However, having multiple credit cards can offer you more rewards, credit, flexibility, and convenience, as long as you manage them responsibly and pay off your balances in full every month. On the other hand, having too many credit cards can also cost you more fees, interest, complexity, hassle, temptation, and risk.
Ultimately, the best number of credit cards for you is the one that helps you achieve your financial goals and fits your lifestyle. Whether that’s one card or ten cards is up to you.
I hope this blog post was helpful and informative for you. If you have any questions or comments, feel free to leave them below.