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What’s the Right Number of Credit Cards?

By Barry Choi

  • UPDATED July 02
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  • 4 MINUTE READ

When considering the "right" number of credit cards for your wallet, it's essential to understand that there is no perfect number. How many you should carry depends on your financial situation, spending habits and financial goals. While some people prefer one card, others prefer having multiple cards to maximize their rewards. Ultimately, the right number of credit cards should align with your goals and budget, but here are some guidelines to help you decide.

Determining the Ideal Number of Credit Cards

The "right" number of credit cards typically depends on your financial habits and goals. Generally, if you manage your budget well and are not worried about going into debt, having a few different credit cards can give you flexibility and possibly help you earn more rewards (like cash back). That said, having only one or two credit cards may be ideal if you want simplicity.

Reasons to have one to two cards

There are benefits to having at least one or two credit cards in your wallet. For starters, having at least one card allows you to build up your credit score if used responsibly.

It also gives you a backup card in case your primary card isn't available. For example, using a Synchrony credit card at retail partners can help you maximize rewards. However, if a retailer doesn't accept your card, a backup credit card can help.

Another bonus: Tracking your spending and payment dates is much easier when you only have one to two credit cards.

Reasons to have three to five cards

Some people may find having three to five credit cards wild, but others love having many cards. That's because every card offers different rewards and benefits. It's not uncommon for people to get multiple cards based on what rewards they can earn.

For example, someone might use one card for home decor and renovation purchases and a different one for gas purchases. Someone who loves to travel may also hold credit cards to gain airline and hotel points or benefits such as airport lounge access.

The other advantage of having multiple credit cards is that they usually lower your credit utilization ratio—the amount of credit you're using relative to the total credit you have access to. A ratio of 30% or less could improve your credit score.1

Strategies for Managing Multiple Cards

Effectively managing multiple credit cards requires some work. You need to optimize rewards, track payments and avoid going into debt. The following strategies can help you handle multiple accounts with confidence.

1. Optimize your credit card use

Maximizing your credit cards is easy—just choose the right card for the right purchase. For example, if you have a card offering 3% cash back on groceries and another offering only 2%, always use the former because you're getting a higher return.

If you find tracking rewards confusing, create a spreadsheet or put stickers on your credit cards to remind yourself about which one to use. Sticking to one or two cards may be easier if you don't think the effort is worth it.

2. Keep track of payments and due dates

Keeping track of your payment dates is critical to avoid fees and maintain a good credit score. One of the easiest ways to ensure you don't miss a payment is to set up automatic payments directly from your bank account. Alternatively, some credit card providers will allow you to change your statement date to align all your cards with a similar date. Another option is to sign up for alerts so you're notified when a statement is posted or your bill is nearly due.

3. Avoid common pitfalls of multiple cards

Having multiple cards may be rewarding, but there are some common pitfalls you need to watch out for, including:

  • • Overspending just to earn rewards
  • • Forgetting to pay a bill, which results in interest charges
  • • Maxing out your credit cards, which could lead to debt or a lower credit score
  • • Forgetting to use the right credit card, which defeats the purpose of having multiple cards

How To Build and Protect Your Credit Score

Building and maintaining a good credit score is essential regardless of how many credit cards you choose to hold. Generally, the credit bureaus use the following factors to determine your credit score:2

  • • Credit utilization ratio: How much credit you're using relative to the total amount of credit you have access to is known as your credit utilization ratio. The credit bureaus typically don't want to see yours exceed 30%.1 For example, if you can access $10,000 in credit, try not to exceed $3,000 in monthly spending.
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  • • Payment history: Missed or late payments can negatively impact your credit score.
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  • • Length of credit history: The age of your credit account affects your credit score.
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  • • New credit inquiries: Every time you apply for a new credit card, your credit score will drop by a few points. It's OK to apply for multiple credit cards, but try to spread out those applications.
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  • • Credit mix: Having different types of credit, such as a credit card, auto loan and mortgage, may have a positive impact on your credit score.

Tips to improve your credit score

Based on how your credit score is calculated, you can implement some of the following tips to help build and protect your credit score:3

  • • Track your spending and ensure your credit utilization ratio remains low (generally below 30%).
  • • Always pay your bills on time to avoid penalties.
  • • Limit your credit card applications.
  • • Consider getting different types of credit.
  • • Be patient, as your credit score takes time to improve.
  • • Check your credit report at least once a year to ensure accuracy, and dispute any inaccuracies immediately.

Understanding Credit Card Rewards and Fees

People mainly apply for multiple credit cards to take advantage of rewards. Since credit cards offer different rewards, you need to understand the basics.

The most common type of rewards you can earn include:

  • • Cash back rewards: You'll earn a percentage of your purchases back as cash. For example, a card may offer 1% to 2% cash back on general home improvement purchases.
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  • • Points: Accumulate points for each dollar spent, which you can redeem for a range of things, such as travel, gift cards or merchandise.
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  • • Miles: Similar to points, miles are typically tied to a specific airline partner.

Assessing annual fees

The major disadvantage of having multiple credit cards is that you may pay many annual fees. However, if the benefits you get are worth more than the yearly fee you're paying, it could still be worth it.

Let's say a credit card has an annual fee of $300, but you can reasonably expect to get $400 in value out of it every year. You're coming out ahead! Alternatively, if a 2% cash back card has an annual fee of $100, you would need to spend $5,000 annually to break even.

When To Apply for Another Credit Card

Consider applying for another credit card if your current cards don't give you rewards on your typical spending categories or you're looking for better benefits. Where you shop regularly can be a determining factor, as some retail credit cards offer good value and benefits with no annual fees. But whether you choose to have one or 10 credit cards in your wallet, make sure you use them responsibly—which means paying off the balance on time every month.

 

Barry Choi is a personal finance and travel expert at moneywehave.com.

 

READ MORE: How Do Credit Cards Work? What You Need to Know

 

Sources/references

1. What Is a Credit Utilization Ratio? Equifax. Accessed May 1, 2024.

2. How Are Credit Scores Calculated? Equifax. Accessed April 7, 2024.

3. How to Improve Your Credit Score. Equifax. Accessed April 7, 2024.