Credit cards are an outstanding asset and a convenient financial tool. Using credit cards wisely helps cardholders to build a solid credit history and score. It also helps to earn awesome rewards and deals. But how many credit cards can you have?
Typically, the number of credit cards a cardholder can have depends on their finances, expenses, needs, and finance management. Having more than one credit card in the current world is quite common due to the splendid offers and rewards provided. But irrespective of the number of credit cards, using them responsibly and avoiding mistakes is a must.
In this guide, I will detail the number of cards a cardholder can have. On top of that, I will discuss relevant information related to the topic along with mistakes that every cardholder must avoid.
How Many Credit Cards Can You Have?
There is no hard (1)and fast rule about how many credit cards you can have. However, popular financial wisdom dictates that having three to five credit cards and other lines of credit is ideal for keeping your credit score in check.
According to Guinness World Records, Manish Dhameja holds the record for the most credit cards with 1,638, so your three to five cards are okay. The drawback to having too many credit cards is that it isn’t easy to keep track of all the payments and balances.
And this often causes cardholders to end up paying more in interest charged on the debt. But as a conscientious spender who keeps track of your monthly payments, you can comfortably manage multiple credit cards easily. Being a conscientious spender helps you to protect and build an excellent credit score.
4 Benefits Of Having More Than One Credit Card
There are several great benefits of having more than one credit card. However, ensuring proper credit and finance management is essential to enjoy the advantages fully. Take a look at the benefits of having more than one credit card.
1. Great Credit Card Rewards:
Earning credit card rewards is a common reason why cardholders go for multiple cards. These rewards are based on various factors and come in handy regarding purchases, bills, travel, etc. While some credit cards offer cashback on shopping and other expenses, a few cards provide miles and points, which can be redeemed later.
2. Credit Card Backup:
Credit cards often get lost or stolen, and this is quite common. However, losing a credit card is highly inconvenient as your expenses halt. You can pay your bills and make purchases if you lose a card by having multiple cards. It works as a backup and prevents the hassle of running around for a new card.
3. Low Credit Utilization Ratio:
Having more than one credit card increases the credit limit of the cardholder. This increased credit limit helps to maintain a low credit utilization ratio. The credit utilization ratio depends on the available balance on the card and the credit limit. Keeping a low credit utilization ratio helps to build a solid credit history.
And the lower the credit utilization ratio, the better. To ensure you have a low ratio, maintain your finances properly and prevent exceeding your credit limit.
4. Financial Flexibility:
Multiple credit cards(2) offer cardholders financial flexibility. It allows cardholders to manage their day-to-day expenses efficiently and helps pay for emergencies. Often, you come across a high medical or vet bill. And spreading the cost over multiple cards does not hurt your credit limit much.
Not only that, but it also helps you to maintain a low credit utilization ratio. However, make sure to pay off the outstanding balance before the interest rate begins to pile on.
5 Mistakes When Picking a Credit Card To Avoid
If you decide to hold multiple credit cards, you need to know the potential pitfalls of having many credit cards. My Credit Planet breaks down the five credit card mistakes to avoid.
1. Getting the Wrong Card:
As you explore the credit card world, you’ll realize there are various types of credit cards you can own. Getting the wrong credit card results in paying higher interest and not maximizing the credit card’s reward system.
To put this into perspective, consider having a travel expense credit card and using it for regular purchases. You won’t get the maximum travel points essential for reaping the rewards on the travel credit card.
When getting a new credit card, you should consider where you spend the most, the interest rate, and the card’s limit. Here is how to determine the credit card to get. Do not fall prey to creative ad campaigns. A credit card is not an avenue to spend money you don’t have; it is a financial commitment you must deliberately choose.
2. Chasing Card Rewards:
Credit cards have multiple perks, from cash back, travel miles, cell phone protection, and more. When you sign up for a credit card, you usually get a sign-up bonus and other benefits if you meet the criteria. However, chasing the benefits when having multiple credit card rewards can prove costly in the long run.
The interest charged on the credit card debt usually exceeds the 2% cashback on most credit cards. Spending on everyday expenses like gas will not earn you enough redeemable points to offset the interest you’ll pay at the end of the month if you choose to carry a balance.
3. Exceeding Your Credit Limit:
It is recommended to not exceed 30% of your credit limit. The reason is that having a higher credit utilization rate (CUR) knocks points off your credit score. A portion of your credit score depends on your credit utilization ratio. Keeping your CUR under 30% of your total available credit boosts your credit score over time.
Maxing out your credit limit puts you at risk of overdraft fees and late payments. If you have multiple cards, it only spells more problems. The fix to this mistake is to spend more on credit cards with lower interest than others. However, your spending habits should not exceed the 30% mark. Calculate 30% of your available credit card limit for a good credit score, and do not spend beyond that.
4. Applying for New Credit Cards Impulsively:
A new credit card is a powerful financial asset in your arsenal. Applying for multiple credit cards may be beneficial with the 0% intro APR, sign-up bonuses, and other perks.
If you apply for several credit cards at once, it will affect your credit score. Each new credit card application opens a hard inquiry into your credit score that is visible for six months to other lenders.
The sudden applications signal a red flag among many lenders who view you as a risky borrower. Too many hard inquiries lower your credit score. If you must apply for a new credit card, ideally, you should wait six months between applications.
However, if you are applying for a new credit card within the same company, you can ask the credit card issuer to convert you to a different card in-house without involving the CFPB. When doing this, know the dos and don’ts of switching credit cards to avoid incurring additional fees.
Also, consider how applying for multiple credit cards at once affects your other credit lines, like mortgages and car financing. Sometimes you may have too many cards for your good, but do not fall into the trap of the fifth mistake.
5. Closing Multiple Credit Cards at Once:
We all have moments of anger when the credit card is declined at the department store, and we swear to close the account instantly. Canceling a card, or in this case, multiple cards, will dent your credit score and affect your credit card limit for future cards.
It is not advisable to close numerous cards at once, especially your oldest cards. Say, you have a card that is three years old and a different credit card that is one year old: your credit age is two years. Closing the three-year-old card reduces your age of credit to one year.
Closing multiple cards might also increase your credit utilization rate, which is the balance you owe compared to the credit card limit. If you must close your credit cards, close the ones with a lower limit and high-interest fees. Alternatively, contact your card issuer to change your card to one that’s manageable and offers benefits worth the fees and interest.
Related Questions:
Is It Better To Have Multiple Credit Cards?
Having multiple credit cards is better than relying on one. Not only that, but it also helps cardholders to maintain a low credit utilization ratio. Cardholders with more than one credit card can access a higher credit limit and earn several attractive rewards.
Multiple credit cards also provide financial flexibility and work as a backup in case you lose any of your credit cards. However, maintaining various credit cards properly is essential to maintain an excellent credit score.
How Many Credit Cards Can You Apply At A Time?
There is no hard and fast rule about how many credit cards you can apply for at a time. Cardholders can use as many credit cards as they want. However, this typically depends on the credit score and history of the cardholder.
Several issuers do not usually issue multiple credit cards to one cardholder simultaneously. But many credit card issuers have specific rules and regulations regarding their credit card approval policy. So, know the policies and terms and conditions before applying.
How Do Multiple Credit Cards Affect Your Credit Score?
Multiple credit cards can affect your credit score in both a positive and negative manner. And this depends on your usage and management of the credit cards. Using credit cards responsibly without exceeding the credit limit and maintaining a low credit utilization ratio helps to build a good credit score.
Paying the balance on time and balancing the payments on the cards also help to improve your credit score. On the other hand, not paying your balances in time results in penalties and fees, negatively affecting your credit score.
Make A Healthy Financial Decision:
The rules are simple if you have multiple credit cards: pay your credit card balance on time, avoid spending past the card limit, keep track of your cards, and avoid the five mistakes above to establish a solid credit history.
Identifying potential errors ahead of time will assist you in making sound financial decisions that will protect your credit score and streamline your financial life. It may also aid you in exploring alternatives to credit cards that work just as well.
References
- Jukwey, E. (2022, June 23). How Many Credit Cards Can You Have? MoneySuperMarket. Retrieved November 11, 2022, from https://www.moneysupermarket.com/credit-cards/how-many-credit-cards/
- How Many Credit Cards Should You Have? | Multiple Cards – HSBC UK. (n.d.). HSBC UK. Retrieved November 11, 2022, from https://www.hsbc.co.uk/credit-cards/how-many-credit-cards-should-you-have/
