How Many Credit Cards Should You Have?


Being in possession of one or two credit cards might be just enough for some while to others, having three to five cards could be the most financially savvy thing to do.

A report from Experian shows that in the third quarter of the year 2020, an average American held a total of 3.84 credit card accounts.

What is the magic number?

Although having at least one credit card is vital in building and improving your creditworthiness, there is no magic number as to how many cards one should possess.

It all boils down to how you make use of your cards.

Number of credit cards directly impact on your credit score

Your creditworthiness is determined by your credit score, the higher the score the more the chances of attracting potential lenders. A good credit score, according to Transunion’s VantageScore 3.0 model score, is within the range 721 to 780.

Now, say you only have one credit card to do your purchases and it has a $1500 credit limit.

If you get a $1000 monthly charge on it, your credit utilization ratio or amount of available credit for use is approximately 67%: (1,000/1,500 X 100)

Experts recommend a credit utilization ratio of about 30% or less. So, in our example a ratio of 67% is way above the recommended figure and only hurts your credit score.

Having several cards however may help distribute the monthly charges across different accounts, hence improving your overall credit score.

You don’t get to charge all of your purchases on a single card. Basically, your utilization rate lowers when you have a new credit account since it adds to your total available credit.

Your payment history on all the cards is also a factor to consider as it has notable effects on your credit score.

Effects of opening and closing a credit card account

When applying for a new credit card, the bank or issuer makes a hard inquiry. This is the request an issuer does in order to determine your creditworthiness. These hard inquiries lower your scores by a few points.

The lost points can be recovered in several months so long as you have good financial practices within that period. It is good to always treat any account opening exercise with the seriousness it deserves.

Closing an account also needs to be well thought out as it reduces your credit limit. This could lower your credit utilization ratio and subsequently impair your credit score.

Closure of an account also lowers the average age of your credit card accounts; this is a minor factor that decreases your score by a few points.

However, this does not mean that you can’t close the account if there are compelling reasons to do so like insecurity factors, including potential fraud or poor services.

Bear in mind that any small action on your credit account, without proper decision making, could have a negative impact on your scores.

The downside of having multiple cards

While having multiple cards comes with many advantages like convenience, optimizing purchases, and maximizing rewards among others, there are also some drawbacks to the practice:

1.    Challenges in tracking your purchases and bills

Having multiple cards may bring confusion as you might be unable to track some of your expenditures. There is also the chance that you could miss a payment which could lead to unexpected fees.

To avoid late fees as well as a hit on your credit scores, it is important to enrol for autopay services.

2.    Unnecessary annual fees

Sometimes having many credit cards may lead to paying unnecessary annual fees while in the real sense you are not fully maximising on the real value of having the cards themselves.

3.    Potential loss of points

Once you have opened a rewards credit card you stand a chance of accumulating miles or points for discounted purchases. Immediate closure of such an account may lead to the loss of the hard-won points.

Bottom line

When it comes to the question of how many credit cards one should possess, statistics or common beliefs may not be what you really need to follow. Managing them well is what is key to keeping your credit scores in shape.

Go for just the right number of cards to help you purchase what you need on credit. Most importantly, only get credit cards which you can pay the due amount, monthly and without fail.

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