How many credit cards should I have?

how many credit cards should I have

Your credit score is affected by the number of cards you have, which ultimately impacts your capacity to secure valuable things like car loans, apartment rentals, and so on.

In other words, credit cards give you extra protection on your finances if well-managed.

There is no magic number for how many credit cards is best suited to have. However, you should analyze all aspects affecting your credit score before deciding the number of credit cards you should have.

A strong credit score allows you to pay an interest rate several points lower on a loan than the rate of someone with a poor credit score would pay.

 If you are a beginner credit card user, focus on building a credit score and payment history with one or two cards and pay off your full balance on a timely basis.

Factors like your credit utilization ratio and your payment history have a direct effect on your credit scores.

Credit utilization ratio is the ratio of your outstanding credit card balances to your credit card limits that measures the available credit you are using.

For example, if your balance is $600 and your credit limit is $2,000, then your credit utilization for that credit card is 30%.

It is a component used by credit reporting agencies in calculating a borrower’s credit score.

How many credit cards does the average person have?

As per the data from Gallup, the average American has 2.6 credit cards, but this includes the 29% of Americans who don’t have any credit cards.

Excluding those who don’t have any credit cards, the average among Americans who have at least one credit card is 3.7 credit cards. We can say that Americans carry an average of four credit cards.

What are the types of credit cards to choose from?

There are different types of credit cards available to consumers, and when utilized rationally, they provide you with a range of benefits. This could be anything from cash back to travel points.

However, they usually come with high-interest rates and annual fees, so it’s significant to ensure good credit score, outweighing the costs by benefits. 

There are several types of reward credit cards listed below:

  1. Travel rewards credit cards
  2. Airline and hotel credit cards 
  3. Flexible rewards 
  4. Premium credit cards
  5. Cashback credit cards 
  6. Balance transfer credit cards 
  7. Student credit cards

Despite the many types of credit cards, any credit card can assist you with your credit score as long as you manage it properly, and a proper credit mix can offer you more valuable purchase rewards and additional benefits. 

Cash back credit cards

Cash back cards, also known as rebate cards, reward a certain percentage of what you spend on the card, usually as a credit on your card balance. Some cards pay cashback monthly, and some pay annually.

Some of the cash back credit cards might let you redeem your rewards points for gift cards, Amazon shopping credits, or even gift travel packages. However, the most common ones are statement credits or bank account deposits.

If you’re used to paying your credit card balance in full each month, a cash back credit card is a golden option, and you wouldn’t have to worry about paying interest.

Travel rewards credit cards

Travel rewards credit cards are one of the most popular credit cards, having the highest earning potential for your spending habits. You can use travel rewards credit cards to get discounts on flights, hotels, and merchandise.

You’ll earn credit card miles with every purchase, and such credit card miles are usually worth one cent per mile

Should you have a large amount of available credit on your cards?

The truth is that you should not have too much available credit since it can be tempting to overspend and incur unnecessary debts.

The more available credit on your cards, the more you tend to spend and increase your debt balance.

You should have only enough available credit to ensure that your outstanding expenses are not more than 30% of your available credit at any given time.

One of the significant factors affecting your credit score is the amount of available credit on your cards, and it is important to determine optimal available credit to maintain a healthy credit score.

When you successfully maintain a low credit utilization ratio and sufficient available credit on your cards, you will get a high credit score.

Eventually, your high credit score will provide you with a better chance of getting a lower interest rate since your credit score determines whether you’ll be offered the best available rate or a higher rate.

You should have a large amount of available credit on your cards for the following reasons:

  1. Lowers your credit utilization 
  2. Increases your credit score
  3. Cheaper and easier to get loans
  4. Increases your rewards

Does how many credit cards I have affect my credit score?

Generally, the way you use your credit card is more important and affects your credit score more.

However, the number of credit cards you have does affect your credit score. When your number of credit cards is increased, your overall available credit limit increases, decreasing the credit utilization ratio.

Can Too Many Credit Cards Hurt Your Credit Score?

Having too many credit cards can hurt your credit score if the total amount you owe on cards exceeds 30% of your credit limit.

However, having many credit cards can also improve your score as it means you’ve more money to use and reduce the debt percentage.

More credit cards mean higher credit limits and better debt utilization, but you should always keep your credit utilization low, pay your balance in full each month, and never charge more than you can afford to pay.

Having numerous credit cards also hurts your credit score if you've opened too many accounts in too short a time.

How many credit cards should I have as a college student?

How many credit cards should you have as a college student? One? two? none? The answer is subjective and varies for every student.

The number of credit cards a student should have depends on their capacity to make their payments on time, manage their money, and avoid overspending.

If used well, they can provide a valuable and long-lasting credit reference. But if you mess it up, you will pay the price for a long time.

Responsible students can benefit from getting a credit card before they graduate from college, allowing themselves to build a credit history that will make it easier to get car loans and apartment rentals after they graduate. But students should be cautious to keep their credit scores strong. 

Thus, it is wiser to conclude that the ideal number of credit cards for college students is one—enough to allow them to build credit but keep that process under control and managed.

However, there is one major risk with carrying just one card: everyday purchases could wind up hurting your credit scores because there won’t be a high credit limit, and 30% credit utilization would be easily met.

Can having more credit cards help build your credit?

Technically, you only need one card to build a good score with a well-managed account. However, having more credit cards would help build your credit, keeping your debt utilization ratio low.

To build a strong credit, you should limit yourself from using more than 30% of your available credit. Having more cards can increase your total available credit limit, which can build your credit score.

Is it better to have many credit cards that have a zero balance or fewer credit cards?

A zero balance card is a credit card on which a consumer does not owe any money. A zero balance won’t bring down your credit score.

The number of credit cards you have does make a difference since every new credit card increases your total credit limit. Adding another card decreases your debt-to-credit ratio. 

If you have many credit cards, it is better to leave them open with the zero balance than having fewer credit cards. Every credit card increases your total available credit, keeping your credit utilization ratio low.

Example of the Credit Advantage of Zero Balance Cards 

Suppose Sam has three credit cards: one zero balance card with a $10,000 credit limit, one card with a $2,000 balance and a $6,000 credit limit, and one card with a $4,000 balance and a $6,000 credit limit.

The total amount of credit she is using is $6,000, and her total available credit is $22,000, making her credit utilization ratio 27.7%.

If she closed the zero balance card, her total available credit would drop to $12,000, and her credit utilization ratio would increase to 50%.

In a nutshell, credit cards can be a golden option to help you manage high-interest rates and get back on your feet if used responsibly.

With the mindset of utilizing your credit cards, how many credit cards do you think you should have? One? Two? A dozen? Or none?

Dustin Heiner

Dustin Heiner is the founder of Successfully Unemployed and the host of the Successfully Unemployed Show. Dustinquit his J.O.B. by investing in real estate and has a passion to teach others to quit their J.O.B. at Master Passive Income.

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