After a big spending spree you might ask yourself, “Do I have too many credit cards?”
Like most things, the answer isn’t cut and dry.
Having multiple credit cards won’t negatively impact your credit scores, but it can make it harder to manage your accounts.
We spoke to several finance experts to find out just how many credit cards you should keep in your wallet, which ones, and how to manage them for the best results.
Here’s what they had to say.
How Many Credit Cards Is Too Many?
There is no “perfect” number of credit cards to have in your wallet. Your credit score won’t tank once you hit a certain number.
In 2020, the average number of credit cards per adult in America was three, according to an Experian report.
It really comes down to personal preference and responsibility. What someone else might consider too many cards may work fine for you and your financial situation.
“It all depends on how well you can manage your credit,” explains Brian DeChesare, founder and CEO of Breaking Into Wall Street.
Although some people might be able to comfortably juggle different due dates on multiple credit cards (while also making good use of those cash-back and rewards deals), others might struggle to meet their minimum payments.
Nate Tsang, who founded WallStreetZen, says that most banks expect people to have anywhere from three to five credit cards.
“At that amount you can reasonably capitalize on your expenses through perks and rewards points without losing track of what you spend,” he explains.
Rather than wondering how many credit cards is too many, ask yourself how well you’re managing them.
When you count your credit cards, don’t overlook the cards from department stores, big box retailers or even home improvement warehouses that you took out to get the initial sign-up bonus.
The Benefits of Having Multiple Credit Cards
If you can pay your credit card bill on time and in full each month, having multiple cards can actually be a good thing.
Maintaining multiple credit cards with low or no balances can boost your credit scores by decreasing your credit utilization ratio.
Your credit utilization ratio, also known as your credit utilization rate, is the amount of available credit you’ve used.
Credit scoring formulas look at utilization in a few ways. Overall credit card utilization — that is, the sum of all credit card balances divided by the sum of all credit limits — is the most common.
Here’s an example. Let’s say your current credit limit is $4,000 and you spend about $2,000 on your card each month. Your credit utilization ratio is 50%.
If you get a second credit card with a $4,000 credit limit but continue to only spend about $2,000 between the two cards, your credit utilization ratio drops to 25%.
You should aim to keep your utilization rate under 30%. Under 10% is ideal.
“The issue is more about utilization than number of cards,” says Freddie Huynh, VP of data optimization with Freedom Financial Network.
But there’s another way banks and credit bureaus can calculate your utilization — and that’s by looking at the greatest credit utilization on an individual card.
Say you’re consistently using 10% of your available credit limit on one card and 70% of your credit limit on another. In this case a bank might only care about that 70%. As a rule, anything over 30% is seen as a red flag by banks.
“If you use less than 10% on each card and are diligent in paying your bills on time each month, then you can improve your credit score,” says Anthony Martin, CEO and founder of Choice Mutual. “But if you surpass 30%, your credit utilization ratio will be too high — and if you mix that with missed monthly payments, it can significantly harm your credit score.”
The Risk of Having Too Many Credit Cards
The biggest piece of advice we heard from experts was this: No matter how many credit cards you have, paying them off in full every month should be a top priority.
“What matters most is that you’re not overextending yourself by taking on too much credit card debt,” says Jonathan Svensson, co-founder of Almvest.
Opening too many credit card accounts at once can also hurt your credit scores.
When you apply for new credit lines, a hard inquiry is placed on your credit report. The more cards you apply for, the more inquiries show up on your credit report.
Your credit score could dip by 5 to 15 points for each hard inquiry, though the drop is short term and shouldn’t last more than a few months.
Opening several credit accounts at once may also impact your credit score by decreasing the overall average age of your accounts.
Remember: “New credit” makes up 10% of your FICO credit score, so having multiple young accounts and hard inquiries can hurt your credit report.
After all, a healthy and stable credit history looks better to a credit card company than a short credit history with multiple recent inquiries.
To keep your credit scores healthy, it’s wise to wait three to six months between credit card applications.
If you plan to apply for auto loans or a mortgage in the new future, you might want to hold off on getting another credit card until after that process is complete.
Should You Cancel Credit Cards If You Have Too Many?
Feeling overwhelmed? You might be tempted to call your card issuer and close your account.
But consider this: When you cancel a credit card, you lose that account’s credit history and available credit — which can lower your credit score.
When you close a credit card, you’re wiping away a big chunk of your total credit limit. The credit card balance on your other cards remains the same, so it looks like you’re using more of your total available credit.
However, it can make sense to close your credit card account in some cases, like if you’re paying a high annual fee on a card you don’t use anymore. Just be sure to follow these precautions whenever you cancel credit cards.
In general, it’s best to keep the accounts open. You can cut up the plastic and delete any saved card information from your phone and computer if you feel tempted to spend.
Which Kinds of Credit Card Accounts Should You Have?
Now that you know a bit about how to maintain your collection of credit cards, consider the types of accounts and credit card issuers you have in the mix.
Although store cards are often a popular choice (who doesn’t want those extra deals at their favorite store?), you want to be sure you’re getting a worthwhile deal before opening one.
“I usually avoid store credit cards because their interest rates tend to be high,” Svensson says. “They’re also limiting because they can only be used at that one store.”
Here are other things you should consider before applying for a new credit credit:
- A low APR: Many credit card issuers offer 0% annual percentage rate terms, usually for the first 12 to 18 months. But that sweet 0% interest rate won’t last forever. And as the Federal Reserve continues to increase interest rates, the cost of carrying credit card debt is getting more expensive. Look for a card with a low APR. The average credit card APR is between 17% and 18.5%.
- No annual fee: Many rewards cards offer great perks — but annual fees can range from $90 to more than $500. If you’re already juggling multiple credit cards, save money and keep it simple by looking for a card with no fee.
- A big (but attainable) welcome bonus: Credit card companies often advertise big welcome bonuses to attract new customers. A credit card issuer usually requires you to spend a certain amount of money within a specific time to get the bonus. Consider your own spending habits to ensure it’s realistic for your budget. You might be able to spend $1,000 in three months, for example, but a promotion that requires you to spend $10,000 in three months might be unattainable.
- Other potential benefits: If you travel outside the country, you might look for a credit card with travel insurance coverage or one that eliminates foreign transaction fees.
When shopping for a new credit card, you should also consider rules surrounding rewards and cash back. Each credit card rewards program maintains its own point structure or cash back percentage.
Some purchases earn you more points than others, while some credit cards offer higher cash back on specific categories, like food or travel.
When deciding what cards deserve a spot in your wallet, it’s helpful to start by looking at your spending.
Are you more likely to use your card to book luxury vacations or to fill your tank with gas? If it’s gas, then a fancy rewards travel card with a high annual fee probably isn’t right for you.
The Bottom Line on Credit Card Accounts
The bottom line isn’t so much about how many credit cards you have. It’s more about ensuring you use your credit cards responsibly.
One of the best measurements of this? Whether or not you’re paying off the balance every month. If you’re struggling to make monthly payments, you probably have too many accounts.
In order to get the most out of your credit cards, take the time to carefully pick the best rewards cards and make a plan for using them wisely.
When in doubt, start small with just one or two credit card accounts until you get the hang of paying them off and making use of rewards. Then you’ll be able to repeat your spending plan and find the perfect balance of credit cards for your lifestyle.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.
Contributor Larissa Runkle frequently writes on finance, real estate, and lifestyle topics for The Penny Hoarder.