How Many Credit Cards Should You Have?

Whether you have a big loan looming on the horizon or you simply want to take control of your finances, managing your credit cards can be a challenging task. You’re not alone; according to recent research, 45% of Americans are confused about the best way to use them.

So how do you make the most out of credit cards? How many is too many? On average, Americans have three to four active credit cards. But that doesn’t mean it’s the magic number—the typical borrower has nearly $5,500 in debt.

Untangling the web of credit card etiquette can be a chore, but many important future life decisions can depend on it. Have a specific question in mind? Use the links below to jump straight to the answer or keep reading for a thorough overview.

• How Is My Credit Score Calculated?
• Can Too Many Credit Cards Hurt My Credit Score?
• Will My Credit Score Drop If I Don’t Use My Credit Card?
• Is One Credit Card Better Than Multiple Cards?

How Is My Credit Score Calculated?

Before diving into how many credit cards may be too many, it’s important to know exactly how your credit score is created. After all, this three digit number has a lot of power when you buy a house, get a new car, or even apply for a job.

There are two main credit score models: VantageScore and FICO. These two models differ in who can be scored and what type of payments are included to calculate the score.

While both models have their advantages, Turbo uses your VantageScore in any situation where your credit score is needed. Here’s the breakdown of how a VantageScore is weighted:

• Amount of your recent credit: 30%
• Your payment history: 28%
• Your current credit utilization: 23%
• Size of your account balances: 9%
• Depth of your credit: 9%
• Amount of your available credit: 1%

Remember, your credit score takes into account credit card debt, loans, mortgages, and other payments to determine the final number. No matter how many credit cards you have, the weight of each of these factors remains the same.

Can Too Many Credit Cards Hurt My Credit Score?

There isn’t a simple blanket answer for this question. While it’s certainly possible that having too many credit cards could hurt your score, there isn’t a specific limit you should stick to. Plus, having multiple cards may actually increase your score if you know how to use them properly.

Let’s take a look at the pros and cons of having multiple credit cards.

Credit Utilization

The Pros

Whenever you open a new credit card, your total credit limit goes up. Depending on how much you owe, this can be a great tactic to reduce your utilization rate.

For example, if you owe $200 on a card with a $5,000 limit, you’re using 25% of your credit. Typically, you don’t want to have a utilization rate over 30%. Since your 25% rate is on the higher end, opening another card with a $5,000 limit would change your total amount of available credit to $10,000. Now your $200 in debt reflects as a 2% debt-to-credit ratio.

A lower ratio may look better to a credit scoring agency or lender because it indicates you don’t need to use every last drop of your allotted credit. Because your score is significantly affected by your utilization ratio, this can be one major advantage to having multiple credit cards.

The Cons

Even though a low is preferable, opening several new credit cards to increase your limit can have a negative effect. When you apply for a card or another type of loan, you give consent for that company or lender to make a hard inquiry into your credit report.

While a hard inquiry only temporarily lowers your score by a few points, it could still make a difference if you’re constantly applying for new cards. Multiple hard inquiries add up, and the drop in your score might exclude you from a loan that you want.

More Rewards

The Pros

Many borrowers with multiple credit cards tout the benefit of earning travel points, cash back, and other perks through their collection of cards. With so many options on the market, it’s usually rather simple to find a card that offers the best rewards for your lifestyle.

To determine which card makes the most sense, take the time to figure out where you spend the most money. Groceries? International travel? Concert tickets? Once you have this sorted out, apply for a card that capitalizes on these habits. If you plan to use a credit card for a significant amount of your purchases, it makes sense that you’re rewarded for responsible spending habits.

The Cons

Rewards cards often feature high interest rates or fees that can quickly damage your score if you aren’t careful. If you don’t pay attention to the APR, all the points or cash back you earn could be negated by the interest you owe from not making your payments on time.

Will My Credit Score Drop if I Don’t Use My Credit Card?

Even if you aren’t using a card, it doesn’t mean that you have too many credit cards—in fact, it can actually be good for your credit score. As mentioned earlier, the higher the credit limit you have, the lower your utilization rate. Having a card with a $0 balance maintains a better credit utilization rate so you can keep your credit score in a prime range.

In fact, closing a credit card you no longer want can have a negative effect on your score. An account with a stable credit history looks much more reliable to lenders than an account that is constantly opening and closing new lines of credit. Remember, your negative payment history stays on your credit report for up to seven years.

However, closing a credit card isn’t always a bad idea. It may be a good decision in certain scenarios:

• The unused card has an annual fee that is taking a bigger financial toll than it’s worth
• You aren’t able to control your spending and are racking up too much debt
• You aren’t applying for a large loan in the near future

There’s nothing inherently wrong with having multiple credit cards, and not using one or more cards might actually improve your score. But the number of cards that is best for you relies entirely on your habits and whether a higher line of credit encourages overspending.

Is One Credit Card Better Than Multiple Cards?

If you’re aiming to improve or rebuild your credit score, it’s easy to assume that having a single credit card and paying it back on time is the best route to go. However, there are many circumstances where multiple cards may be a better option.

A single credit card might make sense if you are just beginning to explore the word of credit. As a newcomer to monthly debt payments, managing multiple cards may be challenging. If you’re trying to build up a healthy credit score for the first time, you might consider looking into retail cards, secured cards, or become an authorized user of another account.

For more advanced borrowers, having many credit cards may be more beneficial than a single card, but it depends on your financial situation and spending habits.

Advantages to Multiple Credit Cards

Business Management

If you run your own business or frequently make job-related purchases, it might be beneficial to have more than one credit card. When you mix both personal and professional purchases onto one card, it could be hard to separate them when it comes time for reimbursement. This is particularly crucial during tax season—you want to prove without a doubt that you aren’t writing off personal expenses as business deductions.

Credit History

The age of your credit history is an important aspect of your score. Think about it this way: a lender wants to know whether or not you have a long record of paying back what you owe. If you continually close cards so you have only one card to maintain, the average length of your credit history shrinks.

If you do want to close a card, you might consider keeping your longest-running account open. This may be more helpful for your credit score and for future loans if lenders can see that you’ve been paying back what you owe for many years.

Emergency Expenses

Using more than one credit card might help you out in case of an emergency. Perhaps one card gets stolen or you need to make a purchase that exceeds the credit limit on your primary card. A backup card may help you get out of a pinch.

Plus, if an emergency forces you to have a month of heavier spending, your credit utilization ratio may be negatively affected. Spreading a large purchase around on multiple cards might alleviate your need for an emergency cash flow – without harming your credit score.

The Bottom Line

So, how many credit cards should you have? It really depends on how well you can keep track of your spending and what you’re looking to get out of a credit card. Consider the above before deciding on your perfect number.