Wondering how many credit cards are too many? You’re not alone. It’s a question that almost all of us have asked at some time or the other. It pops up when applying for our first credit card – should I get just one card or is it better to have more than one? The question often pops up again after using our credit card for a while – should I apply for a second card? Does having more than one card help me build credit faster? Will it give me more purchasing power and is that a good thing?
When it comes to how many credit cards are too many, there’s no one answer that’s right for everybody. There’s no magic number of credit cards that will help every single person achieve their financial goals. Everyone’s situation is unique and different. The right number for you will depend on your spending habits and your reason for getting more than one card.
Understanding the pros and cons will help you determine the right number of credit cards for you and how many are too many.
The Case For Using Just One Credit Card
· One billing cycle is so much easier to manage as compared to managing multiple billing cycles: With one credit card, you have to remember only one payment due date and one payment amount. Moreover, the payment due date is always on the same date every month, making it even easier to remember. You only need to keep track of the payment amount every month. Managing one billing cycle minimizes the likelihood of missing a payment date, which is one of the risks of multiple billing cycles.
· One credit card is enough to build credit: Payment history is the only factor that goes into calculating your credit score. It doesn’t matter how many credit cards you have or how much you spend on your credit card. When it comes to building credit, the only thing that matters is that you make all payments on time. Making on-time payments with one credit card is far better than having multiple cards and missing payment due dates.
The Case For Using More Than One Credit Card
· Reduces your credit utilization ratio: Credit utilization indicates how much of your available credit you are using. It is another factor that’s considered when calculating credit scores. The lower your credit utilization, the better. Having multiple cards increases your credit limit, which helps to keep your credit utilization ratio lower than the recommended 30%. However, this only works as long as you don’t overspend just because you have additional credit. Spending more will increase your balances and your credit utilization ratio, defeating the purpose.
· Increases your credit accounts: Having a mix of credit accounts is another factor that adds to your credit score. Making on-time payments on all accounts shows that you’re a responsible borrower and boosts your score. If you don’t have any loans against your name and don’t want to take one, getting multiple credit cards can help. This is of course provided that you clear the outstanding on all cards on time. Otherwise it will defeat the purpose.
· You enjoy a wider variety of rewards and benefits: One of the many attractions of having a credit card is the rewards in the form of cash back, points, or miles. Having multiple cards that offer different rewards allows you to make the most of every purchase you make using your credit cards. For example if you’re a frequent traveler, a travel rewards card will help you earn miles that you can use against future travel or hotel stays. A second card, which offers cash back on groceries, eating out or gas can help reduce the cost of purchases in those categories.
So How Many Cards Should You Get?
Getting multiple credit cards certainly offers more benefits. It allows you to build your credit score faster, gives you more purchasing power, and lets you access a wider variety of rewards.
On the downside, having multiple credit cards means having to keep track of multiple payment amounts and payment due dates every month. Having multiple cards may also tempt you to buy unnecessary stuff on impulse, leaving you with higher bills. If you can’t afford to pay the outstanding by the due date, you’ll end up paying hefty late fees and interest, which could potentially send you into credit card debt.
If you are an impulse shopper but can’t afford to pay your bills, consider staying on the safe side and using just one credit card. It’s also a good idea to stick with one credit card if you have trouble remembering payment due dates.
Most people need just one credit card. In most cases, one card is sufficient to build credit, provided you use it responsibly. One card is also sufficient to get the purchasing flexibility that you need. Consider getting a second or third card only if you really need it and if you’ve got an ironclad strategy in place for paying off all bills on time.