Should You Have Multiple Credit Cards?
In our article on the easiest credit cards to get, we defined a credit card and showed the various types you can apply for with minimal requirements. But is the fact that you can obtain these credit cards without stress a good enough reason to have as many of them as you like?
Meanwhile, several credit cards provided by traditional banks, neobanks, credit unions, fintech companies, other financial institutions, and non-banking financial companies (NBFCs) come with some incentives to encourage consumers to sign up for them. By offering perks such as 0% interest rates, cashback, travel miles, and various airline rewards, credit card providers attract new customers and make existing ones continue to patronise them. Still, is it wise to use multiple credit cards because of these benefits?
This article discusses whether you should have many credit cards. It answers the most relevant frequently asked questions on this topic and provides expert tips for managing more than one credit card.
What is the Ideal Number of Credit Cards to Have?
Many people are asking, "How many credit cards should I have?" The simple answer to this question is "at least one." Nonetheless, depending on your financial situation, it might be necessary for you to have two or more credit cards, preferably those that come with different rewards, to help you access extra lines of credit for various purposes.
So, it is okay to have many credit cards since there is no ideal number for everybody: one for frequent shopping (online or in person), a second for travel expenses, and a third for bills or entertainment needs. The number and respective purposes can go on, but you should only get more than one credit card if you have no problems managing your personal finances.
Before you open more than one credit card, ensure that you know how to keep your expenses below your income. If you are not sure about this, read our posts about the worst personal money mistakes people make and the common blunders to avoid when opening credit cards. After that, you should be able to evaluate yourself and decide on a number of credit cards that will not get you running into debt, paying too much money on interest and fees, and hurting your credit score.
Is There Anything Like Too Many or Too Few Credit Cards?
Whether your credit cards are too many or too few depends on your situation. Again, there is no perfect number of credit cards to have. Therefore, it is better to let your income, spending habits, and creditworthiness determine how many credit cards are too many or too few for your personal needs.
Someone with a poor credit score should apply for just one credit card that can help them improve their credit history. An example is the thinkmoney Credit Card, which is for credit builders. In such a situation, getting two or more credit cards will make things worse for the consumer.
Unlike those who need to build their credit history with a few credit cards, consumers with good credit scores can apply for multiple low-interest credit cards from Capital One or any other provider. Moreover, those in need of credit cards for managing business spending can open as many accounts as they need with top providers such as MoneyNetint, Pleo, and Capital One.
In any case, it is critical to open only the number of credit cards that you can use regularly with proper account management—not carrying balances from month to month. In that way, it is possible to see a rise in your credit score.
Therefore, it makes sense to conclude that your credit cards are too many when you cannot keep track of them or end up with idle cards and risk hurting your credit. And having too few credit cards means not having enough to meet your personal or business spending needs.
Does Having Multiple Credit Cards Hurt Your Credit Score?
Before answering the question of whether your credit score can be affected by the number of credit cards you have, it is important that we first explain what is known as a "credit utilisation rate" or "credit utilisation ratio."
Understanding your credit utilisation ratio (CUR)
In credit card management, a cardholder’s debt-to-credit ratio is known as their credit utilisation rate (CUR). It is calculated by dividing the credit card balance (debt or amount owed) by the credit card limit (maximum amount available to spend). For example, if your credit card limit is €10,000 and you have a balance of €2,000, your credit utilisation rate is 20%.
How multiple credit cards affect your CUR and credit score
Financial experts recommend keeping your credit utilisation ratio below 30% to avoid having a bad financial profile before institutional lenders. So, to maintain a good credit score, you need to keep your credit utilisation rate low.
Now, when you open many credit cards, there is one of two things involved: you either manage them properly or poorly. Since all your credit cards are taken into consideration when assessing your creditworthiness and calculating your credit score, you need to be careful about how you use the cards.
Opening new credit cards will systematically increase your total credit limit. Mathematically, all other things being constant, your CUR will reduce, and you may see a rise in your credit score. In that case, your credit score was improved by having many credit cards.
But if the reverse is the case and you fail to properly use the new credit card and end up significantly increasing your debt, your CUR will increase. If it exceeds 30%, the conclusion will be that your credit score was hurt by the addition of more credit cards.
Another factor to consider when applying for many credit cards is what makes up the score that your credit rating agency gives to cardholders. For example, 10% of your FICO score is calculated using the number of new credit card applications that you have made, and 30% of it is based on your CUR. So, submitting many applications for credit cards in a short space of time typically leads to more hard inquiries on your credit history, which may reduce your credit score and make lenders think that you cannot manage your credit responsibly.
How long should I wait before getting another credit card?
A good rule of thumb is to wait at least 90 days (or three months) before opening a new credit card. The reason is that making many applications for credit cards in a short period, such as less than six months, may damage your credit score.
Nevertheless, in practice, how much time you have to wait before applying for a new credit card depends on several factors. They include the terms and conditions of your card issuer, your risk tolerance, whether you are rebuilding credit (for which you should allow enough time), and your credit score.
Can you have two of the same credit cards?
Maybe. If your credit issuer allows it, you can have two or more of the same credit cards or multiple cards with different rewards from the same company. For example, Capital One permits its customers with a good credit history to have as many of its cards as they want.
However, some credit card companies will reject any application for a new credit card from a customer who already has an account. Therefore, contact your card issuer to know whether you can have two or more of the same cards or multiple credit cards from them.
Pros and Cons of Having Many Credit Cards
Anyone who uses many credit cards is often addressed as a "multiple credit card holder." This status comes with some advantages and disadvantages, especially maxing out on rewards and finding it challenging to stay organised, respectively.
Therefore, it helps to consider the following pros and cons of having many credit cards before seeking to become a multiple credit card holder:
- You can earn maximum rewards and cashback on many of your payments, including those in respect of shopping, restaurant bills, entertainment, gas, and travel.
- You are sure of having instant backup cards if one of your credit cards gets damaged, missing, or stolen.
- You can keep your credit utilisation ratio low as you add more credit cards and increase your total credit limit.
- You can easily transfer your balance from a high-interest credit card to one with a low interest rate and save money in the process.
- Almost every new credit card requires a hard check on your credit history, and many such operations could reduce your credit score.
- Having many credit cards typically means paying more money on fees, interest rates, and other charges in various terms and conditions.
- You are more likely to be less organised and forget to pay a bill on time, incurring the costs, when you have many credit cards instead of using just one.
- Credit card issuers may see you as an irresponsible borrower if you frequently open new credit cards.
- You are more likely to incur huge debts when you have multiple credit cards than when you have just one or two cards.
How to Manage Many Credit Cards
It is almost impossible for many people to use just one credit card these days. That is because there are many mouth-watering rewards to max out when you use two or more cards from the best credit card providers. So, what is more, important than the number of credit cards you can have for personal or business expenses is knowing how to manage them properly.
Below are our tips for managing multiple credit cards without hurting your credit score or looking irresponsible in the eyes of lenders.
- Always use less than 30% of your available credit to maintain a low and acceptable credit utilisation ratio.
- Give a three-to-12-month gap before applying for an additional credit card.
- Pay your credit card balances on time to avoid interest and other charges. You can set automatic reminders on your mobile phone to ensure that you do not forget to make timely payments on your credit card.
- Use your credit cards only for purchases you can afford.
- Try to keep old credit card accounts open to build a long credit history and improve your credit score.
According to most financial experts, you should allow a period of not less than three months between your dates of application for each new credit card. Better still, you can give a six-month gap between one credit card request and the next.
The reason for giving yourself enough time before trying to get an additional credit card is that lenders usually perform a hard credit check on you when processing your request for a credit card. Therefore, the more applications you make, the more you get checked, and frequent hard inquiries on your creditworthiness can hurt your credit score.
No, it is not! Having too many credit cards means that you are unable to keep track of them. The risk involved here is that you are likely to forget to pay your balances on time and end up incurring interest and other charges on your account. Such a situation could leave you running into huge debt.
It is possible to build credit faster with multiple credit cards, but that is only if you can manage them properly. Failure to make timely card payments and maintain a credit utilisation rate of less than 30% can harm your credit score even more.
Under certain conditions, cancelling a credit card might hurt your credit score. That is why it is generally not advisable to close your credit card account without good enough reasons.
Remember that your credit utilisation rate, which is the ratio of your debt to your total available credit limit, is one of the factors used in calculating your credit score. So, if you close an old credit card with a high credit limit, your credit limit will be reduced, and if your debt is too high, your credit utilisation rate may exceed the 30% optimum level.
Conclusion: Manage Your Cards Properly!
Under normal conditions, it is a good idea to have many credit cards from the best institutional lenders. By doing so, you will be able to benefit from different kinds of rewards, including cashback and travel bonuses. Also, you can enjoy using different cards for different purposes if you pay your balances on time.
Furthermore, as a multiple credit card holder, you can use your status to keep your credit utilisation rate low and your credit score high. The most important thing is to ensure that you are managing all the cards properly. For that reason, you should not open more cards than you can maintain; otherwise, you might run into debt and hurt your credit score by having too many credit cards.
Finally, remember that keeping track of your debt is the most crucial thing to do while using many credit cards. Watch your spending on each credit card carefully, as well as the dates when each payment is due, to avoid accruing credit card debt, paying exorbitant interest rates, or incurring late penalties. Additionally, paying off the entire debt on your credit cards each month as opposed to just the minimum is a good and wise habit to have.