How Many Credit Cards Should I Have?

FT Contributor
9 different credit cards fanned out in a woman's hand.

The ideal number of credit cards depends on your personal needs, financial plans, and spending habits.

The Guinness Book of World Records lists Zheng Xiangchen as the person with the most credit cards ever. He had 1,562 credit cards. 

Few people would be able to manage more than 1,500 credit cards. However, the example of Zheng Xiangchen does provide an answer to the question: “how many credit cards should I own?” You can own as many credit cards as you can manage successfully, but you should not open more accounts than you can handle.

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Importance of Credit Cards

You often hear about the drawbacks of credit cards, but if you use them wisely, you can also enjoy some great benefits. For example, credit cards are one of the most convenient and useful financial tools for building a credit history and increasing your credit score, which can affect your ability to purchase a home or a car. Credit card companies report your activity to one of the credit bureaus. The credit bureaus use your data to calculate a credit score, which is what lenders and other credit card companies use to weigh your creditworthiness when you apply for a loan, mortgage, or new credit card.

You can also earn valuable rewards through proper credit card usage and account management. For example, some credit card companies offer “points” that you can use for rewards such as gift cards, while others let you earn “cash back rewards” that come in the form of statement credits that lower your balance. Many rewards cards offer travel bonuses or provide frequent flier miles that you can use just like miles earned from flying.

Furthermore, with multiple cards, you can enjoy introductory bonuses such as bulk rewards points or 0% interest rates. To qualify for these bonuses, you usually need a good credit score, which you can expedite by managing multiple cards correctly.

Multiple cards will increase your purchasing power and help you make large purchases that you would not be able to afford with cash. As long as you’re able to limit interest charges, you can make purchases without having to wait to save some money to cover the cost of the purchase.

Benefits of Multiple Credit Cards

You can compound some of the benefits of credit cards if you use more than one. Furthermore, some of the strategies for increasing your credit score, using credit cards as budgeting tools, and earning rewards require multiple credit card accounts.

Stack Credit Card Rewards

You can use multiple credit cards to stack credit card rewards. To use this strategy, you need to find credit card rewards programs that fit your spending habits. The goal is to have multiple credit cards that offer significantly higher rewards in a given category. The purpose of stacking credit card rewards is to get the maximum points, miles, or cashback award for each purchase.

For example, the American Express Blue Cash Preferred offers 6% cash back at grocery stores and 3% cash back at gas stations. You would use this card for groceries and fuel, but not for other purchases, which only offer 1% back. You would then use the Capital One Savor card, for example, to earn 4% cash back at restaurants.

You can choose the type of rewards that you want and then select cards that offer those rewards. For example, you could stack rewards with cashback cards or save for travel with cards that offer rewards in the form of airline miles.

Another aspect of this strategy is to take advantage of introductory bonuses. For example, if you reach a spending threshold in the first few months of card ownership, some cards award you a large block of bonus points.

To get the full value for your rewards, you need to pay off the balance monthly by the due date. Any interest charges will cancel out some or all of the value of the rewards.

Help With Budgeting

You can use multiple credit cards to organize your spending by amount or type. For example, you would be able to easily track grocery spending by having one card that you use only for supermarket purchases. Using different cards for different categories can help you track spending and, ideally, stick to a budget more faithfully than if you had a single debit card or used cash for purchases.

You can also use multiple credit cards to make larger purchases that you might not otherwise be able to afford if you had to pay in one lump sum. Credit cards help you make purchases without having to apply for a loan. With multiple cards, you can also manage repayment and have the option to shift balances to take advantage of any balance transfer offers that could lower the interest rate.

Build Credit Score

Credit cards offer the most effective way to build a credit history and increase your credit score. There are two primary reasons to have more than one credit card for building your credit score. First, with multiple credit cards, you will be providing more data to the credit bureaus who calculate your credit score.

More importantly, multiple credit cards increase your credit utilization ratio. The credit utilization ratio is one of the most important variables that go into calculating your credit score. The credit utilization ratio is the total credit limit compared to the amount of credit that you use from all sources.

If you have multiple credit cards, the overall sum of your credit limit will be higher than if you only had one card. If you manage the cards correctly, you can use this higher total credit limit to build an ideal credit utilization ratio. In general, a lower credit utilization ratio is better.

Increased Credit Limit

Having multiple cards will increase your credit limit to build an ideal credit utilization ratio. You can also increase your purchasing power by getting more cards and increasing your overall credit limit.

With one card with a $2,000 credit limit, your purchases need to be limited to $2,000. However, if you have four cards with $2,000 limits, your purchasing ability is $8,000. You have access to $8,000 without needing to apply for an additional loan.

Of course, you need to be able to manage repayment for each of the four cards to use this purchasing power effectively.

How to Decide How Many Credit Cards Is the Right Amount

The ideal number of credit cards varies from person to person. How can you decide the number of cards that is right for you? You need to weigh a few different factors.

Payment History

The ability to make payments is vital for managing multiple credit cards. If you have struggled to make payments on time on one card in the past, then you should not apply for additional cards. On the other hand, if you have managed three cards successfully in the past, you can get at least that number, and you may even want to consider a fourth.

Looking at your past credit card management record can help you decide how many cards you may be able to handle in the future.

Credit Mix

Credit bureaus use your credit utilization ratio to calculate your creditworthiness. You can also use this figure to decide how many cards you’re able to handle. If you have cards that have a balance at or near the credit limit, your credit utilization ratio will be quite high, and your credit score will be very low as a result.

By spreading that same balance out to multiple cards, you increase your credit limit and decrease your credit utilization ratio. Not only do you decrease the overall ratio, but you also reduce the credit utilization ratio per card, which can positively affect your credit score.

Credit Card Terms

When managing credit cards, it is vital to understand all the terms for each card. These terms can differ significantly from one credit card company to the next. You need to look through the credit card agreement for each card to find information about interest rates, due dates, grace periods, and the length of billing cycles. If you are stacking rewards, you need to become familiar with rewards programs and learn any restrictions about claiming or cashing in rewards points.

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