How Many Credit Cards Are Too Many?

How Many Credit Cards Are Too Many?

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There is no magic number as to how many credit cards a person should have. Ideally, when you utilize credit cards, you should keep your utilization below 50% and always pay on time, regardless of how many credit cards you use.

How Many Credit Cards Should I Have?

The number of credit cards you choose to have comes down to personal preference. With that said, as you determine how many credit cards you think it’s wise for you to secure, you’ll ideally choose to base that decision on your spending habits and the factors associated with credit cards that could impact your credit.

What Are Possible Issues with Having Too Many Credit Cards?

If you find you’re struggling with any of the following, then you might have too many credit cards. Or, if you’re currently doing ok managing the cards you do have, then the following are issues you want to prevent from occurring.

Managing Different Due Dates

The more credit cards you have that carry a balance, the more due dates you’ll have to ensure you pay on time. Your billing cycle for a particular card will be determined based on the creditor’s specific factors, and it’s highly unlikely you’ll have credit cards that have due dates that fall on the same days of the month. To ensure you remember to pay your bill on time each month, creditors offer you the option to set up autopay on your account. Or, if you prefer not to utilize autopay, it can be beneficial to mark your calendar when payments are due if this is an area in which you struggle.

Hard Inquiries on Your Credit Report

If you open credit accounts close in time to each other, you’ll end up with several “hard inquiries” on your credit report. A hard inquiry occurs any time a creditor checks your credit report to assess the risk level if they approve you for a credit account. The effects are generally short-lived, though if you apply for several credit cards in a short period of time, you could be perceived as a high-risk applicant. Also, several credit inquiries close together can negatively impact your credit score.

What Factors Could Impact My Credit Score and Credit Approval?

If you’re comfortable with your current number of credit cards or your plan to open more, the following information will help to further inform your decisions and choices on what factors can impact your credit score and credit approval when opening new credit cards or having several to manage.

Payment History

Regardless of the number of credit cards you choose to have, it’s essential you pay your monthly bills on time. When you run late on paying your credit cards, it has a negative impact on your credit.

Credit Card Utilization

The rule of thumb is to keep your credit card utilization below 50%. When you go over a 50% utilization rate, it can negatively impact your credit report, meaning your score will likely go down by a few points or more, depending on where your utilization falls.

Length of Credit History

The longer you have a credit card that’s in good standing, the better. So, having credit cards that have been open for a while positively impacts your credit, assuming those accounts are in good standing.

Timing of Applications

For some purchases, specifically buying a home, it’s essential that your credit remains as is throughout the approval process and even for a period of time beyond your approval. If you’ve been approved for a mortgage loan, and then a new creditor shows up on your account, it can negatively impact your mortgage loan approval. It’s vital that you openly communicate with your realtor and loan officer for clarity on what is permissible and not permissible to pursue from a credit perspective when you’re attempting to make a large purchase, like securing a home.

Which Credit Cards Are Best to Have?

As you’re considering opening new credit card accounts, it’s wise to consider the factors discussed above. In addition, it’s also good to think about your spending habits since many credit cards offer perks on travel, food and dining, and other purchases, like gas. Other factors to consider when shopping around for credit cards are the annual fees, late charge fees, and over-limit fees, so you can choose the card that best fits your specific circumstances and spending habits.