How many credit cards should I have? That’s a common question, one that doesn’t have a straightforward answer. That’s because the “magic number” of credit cards depends on a lot of things, such as income level, debt, spending habits, expenses, and a myriad of other moving parts that vary from person to person.
But one thing that’s constant is this: there is such a thing as having too many credit cards. This is true for everyone, even though that number will be different for each person.
Let’s look at how you can decide how many credit cards you should have and what to do next.
How Many Credit Cards Does the Average Person Have?
According to Experian, the average American has four credit cards. Other sources point out that the average American usually has a mix of major credit cards and retail store cards. In addition, the average credit card balance is $5,315, while the average credit limit is just over $30,000.
How the Number of Credit Cards Impacts Your Credit Score
The number of credit cards you have to your name can impact your credit score, even if you have credit cards that are open that are not actively being used.
In some cases, having a high number of credit cards can be a good thing if you are using them minimally. This means that you have a higher amount of available credit, which can help your credit score.
However, having a lot of credit cards can also negatively hurt your credit score if you have a high credit utilization rate and are struggling to keep up with the various payments. The more credit cards you have, the more credit card bills you have to pay. Each bill may have its own deadline and minimum payment due. This might increase your chances of missing a payment altogether or paying your bill late, both of which may show up on your credit report.
About 65% of your FICO score comes from your payment history and credit utilization. Paying your bills on time and keeping credit utilization to a minimum are more important than the actual number of credit cards to your name.
However, you want to avoid opening a lot of credit cards, especially in close proximity to each other. Just the simple act of opening a new credit card can lower your credit score, albeit the decrease is modest.
If you want your credit card portfolio to help your credit score, it's best to be strategic about the credit cards you choose. Try to avoid opening more than you can feasibly manage each month and keep your credit card utilization as low as possible to make your credit cards work for you.
The Benefits of Carrying Multiple Credit Cards
Aside from the strategic value of helping your credit score, carrying multiple credit cards also comes with a few benefits. For example, if you qualify for credit cards that come with rewards, you can take advantage of multiple rewards programs.
For example, one credit card might offer cash back or points in a specific category, such as travel. Other credit cards, such as an Amazon credit card, might offer store specific rewards. If you already spend a lot of money at that store, then the credit card becomes even more valuable.
If you own a business or are a member of the gig economy, having multiple credit cards can make bookkeeping less of a hassle. You can use one credit card for your business expenses, one for your everyday expenses, and save one for emergencies only, for example.
Last but not least, having at least three credit cards may help you if you are looking to buy a home. Many mortgage lenders require applicants to have at least three credit lines in order to qualify for a mortgage.
What to Do If You Have Too Many Credit Cards
The key is to avoid damaging your finances with too many cards. If you are consistently missing payments, maxing out your credit, or just don’t have a lot of experience with credit cards, then you probably have too many.
If you do see that you have multiple credit cards, it’s tempting to just close a couple of accounts. This makes logical sense, but can also have a negative impact on your credit score. Closing a credit card lowers your available credit and increases your credit utilization, which can ultimately lower your credit score. It also can decrease the average age of your credit accounts, which may also impact your score.
The best reason to close a credit card account is if you're paying an expensive fee and maintain that card. Also, if you are struggling to keep up with payments, you should pay off that card or transfer the balance and then close that card to avoid overspending.
Another option is to leave your credit card account open and stop using it after you pay it off. This lets you maintain the benefits of credit utilization and age but also ensures you’re not spending more than you really should.
Now is a good time to do a financial wellness checkup and get your credit in shape. Explore our free financial community and resources to start crushing your money goals!