How many credit cards should you have – really?

ideal number of credit cards

By Jason Steele
Reviewed by Lauren Bringle, AFC®

How many credit cards is too many? How many credit cards should you have if you want an excellent credit score? I wish I could offer you a magic number of credit card accounts to have, but the ideal amount is different for each person.

Some people can achieve their goals by managing over a dozen credit cards, while others probably shouldn't have any. For a long time, there have been people trying to designate a certain number of credit cards as the ideal number for having excellent credit. So, how many credit cards should a person have? Let's dive into the different considerations.

How many credit cards should I have?

Wondering if it's bad to have too many credit cards? According to Shift Processing, there are about 1.06 credit cards in use in the United States. This considered, the average American has about 2.7 credit cards each.

Americans report having 2.6 credit cards per person, including the 29% who don’t have credit cards. Among those who have a credit card, they report holding an average of 3.7 cards per person.

It’s unclear why there’s such a discrepancy, but it could be due to survey respondents reporting cards that they hold as authorized users, or confusion between credit and debit cards.

What’s the right number of credit cards for you?

Credit cards are incredibly powerful financial tools. Their advantages include convenience and security as well as rewards points and benefits. There are different kinds of cards and rewards to consider as well, which is why some people may go for a retail card or a small business credit card. And of course, a credit card can be used to finance purchases. But credit cards come with risks.

Credit cards can be used to incur debt, and when not managed responsibly, can damage or ruin your credit rating if you don't pay down your balance or pay it off completely. Carrying a balance over time will incur interest, increasing the cost of using the credit card. If you have a good credit score, you want to maintain it by making timely payments. And beyond the cost of interest payments, credit cards can also come with annual fees and late payments. The right number of credit cards for you will be enough to leverage all of the benefits of credit cards, while minimizing their drawbacks.

If you're someone who can't remember (or afford) to pay on time, and you don't take advantage of features like payment reminders or autopay, then having a credit card might not be the right choice for you. In fact, irresponsible credit card use could hurt your Vantage or FICO credit score, rather than help it.

How credit card accounts can affect your credit score

There are several factors that affect your credit score. The two most important factors in your credit score are your payment history and your amounts owed, respectively comprising 35% and 30% of your score.

Payment history matters

For some credit card users, having more credit card accounts will increase the chances of making late payments, which will hurt their credit history. These cardholders will want to limit the number of credit cards they have to an amount that they can comfortably manage every month to avoid a late payment and penalty.

If opening an additional credit card account will make you more likely to miss a payment, then that's one too many. And if you already have more accounts than you can responsibly manage, then it would make sense to cancel some or all of them.

The impact of debt-to-credit ratio

The “amounts owed” portion of your credit score can also be affected by the number of credit cards you have. This criteria looks at your debt-to-credit ratio, which is the total amount of credit card debt and other debt you have across all accounts, divided by the total amount of credit you’ve been extended.

With each new credit card account you open, you’ll increase your total credit extended. This will reduce your debt-to-credit ratio, for a given amount of debt. Likewise, when you close a credit account, you’ll increase your debt-to-credit ratio so long as your debt level remains unchanged.

Opening new credit card accounts

15% of your credit score is determined by the length of your credit history. This is the average length of all accounts that appear on your credit report. With each new account you open, you’ll initially reduce your average age of accounts.

While closed accounts will continue to appear on your credit report, the length of time they’ve been open will no longer increase. Therefore, it’s good to keep your credit card accounts open for a long time, although it’s not nearly as important to your credit score as your payment history or your amounts owed.

The number of new accounts you've opened represents 10% of your credit score, and your mix of credit makes up the final 10%. When you open several new accounts in a short period of time, the credit scoring formulas can interpret that as a sign of possible financial distress, which will hurt your credit rating. But opening just one or two accounts in a year should have little effect on this factor.

Your credit mix is just the different types of credit you have, such as credit cards, car loans, student loans, personal loans and home mortgages. The wider the mix you have, the better it will reflect on your credit score.

The number of credit cards you have won't have any effect on this aspect of your credit. At the same time, no one recommends taking out different types of loans just for the purpose of improving your credit score.

So, is it bad to have too many credit cards? As far as just your credit score is concerned, there’s no way to have too many credit cards – as long as they are managed responsibly. There are credit card rewards enthusiasts who have dozens of accounts open and in good standing, and they continue to enjoy excellent credit scores.

As long as all the payments are made on time, and the utilization is low, each new account can adds positive credit history and adds to the total amount of credit extended, helping your score. See more about using credit cards to build credit.

How you can benefit from having multiple credit cards

Each credit card offers a unique set of rewards and benefits, and some credit card users try to obtain the maximum advantage from their cards by having numerous accounts.

When it comes to maximizing the rewards that you can earn, one credit card might offer exceptional cash back rewards for grocery purchases, while other rewards cards have the best returns for dining or travel.

A reward credit card maximizer would likely have both of those cards, as well as a separate one for all the charges that don’t qualify for a bonus.

The same is true when it comes to receiving the most benefits. For instance, most airline credit cards will offer benefits like a free checked bag and priority boarding. Hotel rewards credit cards can offer perks such as room upgrades, late checkouts and even free breakfasts. Other premium reward credit cards can offer airline fee credits, and memberships in airport business lounge clubs.

For frequent travelers, it can be worth paying the annual fee for several of these cards, so long as they are able to obtain enough value from the rewards to justify the cost of the annual fee. In fact, frequent travelers might keep some cards just for their benefits, while rarely using them to make purchases.

But even if you're not interested in rewards or benefits, having multiple credit cards can also offer redundant forms of payment. For example, if one of your credit cards is lost, stolen or damaged, then you can continue to use another card until the other card is replaced. And if your American Express card is not accepted at a particular merchant, then you'll want to have a Visa or Mastercard to complete the transaction.

As a result, it makes sense for most responsible credit card users to hold two or three credit cards. This offers them a way to build an excellent credit history while having a backup in case they are unable to use one or two of their cards for any reason. But if credit cards are not used responsibly, then some people are better off not having a single one.

How will opening a new credit card impact your credit?

When you open up a new credit card account, it will have several direct and indirect impacts on your credit. First, you’ll add a new account, which by itself will have little, if any, effect. But if you’ve already opened several new credit accounts within the last year, then it could have a small, but significant negative effect on your credit.

At the same time, opening up a new account will increase the total amount of available credit that you've been extended, which will reduce your debt to credit ratio if your amount of debt remains the same. This can have a positive effect on your credit score. And as you make on-time payments to your account, you'll increase the positive information in your credit history, further increasing your score.

The negative effects of opening up a new credit card account are all indirect. If opening up a new account causes you to make unnecessary purchases or incur debt, then this will be very costly. And if an additional credit card account is too challenging to manage, and causes you to miss payments, then your credit score will suffer.

Other factors to consider when deciding how many credit cards to have

Some people think that it’s bad to have a zero balance on your credit cards. Actually, there’s no harm in having an unused card with a zero balance. However, most credit card issuers will close accounts of cards that haven’t been used at least once in the last 12 months. So if you want to ensure that your account remains open, remember to make at least one charge to it every year.

Others could be under the impression that it’s bad to have two or more accounts from the same issuer. Actually, it makes no difference to your credit score. Another concern some have is for the practice of opening up multiple credit card accounts to earn rewards. As previously stated, opening up several new accounts in a short time period can hurt your score, but the effect is both minor and temporary. The fact that your motivation was to earn rewards has no effect on your credit score.

Another issue that worries some people is the effect of small business credit cards. Holding business credit cards may or may not affect your credit, depending on whether the card issuer reports your business accounts to the major consumer credit bureaus. Some do and some don’t, and the only way to find out is by reading about the experiences of others, or finding out for yourself.

Bottom line

There’s no right number of credit cards for everyone, and those who worry about it too much might be missing the point. If you manage your cards responsibly, then there’s no harm in having as many cards as you’d like. But if you miss payments and incur debt with your cards, then you may have too many, even if you only have one.

About the author

Jason Steele has been writing about credit cards and personal finance since 2008, pouring through the terms and conditions of credit card agreements to understand the minutiae of how these products work. His work has appeared on Yahoo, MSN, HuffingtonPost and other major news outlets. In his free time, Jason’s a commercial pilot. He graduated from the University of Delaware with a degree in History.

About the reviewer

Lauren Bringle is an Accredited Financial Counselor® with Self Financial– a financial technology company with a mission to help people build credit and savings. See Lauren on Linkedin and Twitter.

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Written on June 13, 2019
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@self.inc.

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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