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There’s no right or wrong answer to the question of how many credit cards to have. More importantly, you should aim to understand what affects your credit score, and how the number of cards you have plays into your ability to responsibly manage your credit.
How Many Credit Cards Should I Have?
Is three cards too many? Should I apply for another card? What should I do if I have too many credit cards? How many cards do people with good credit have? If you’re asking these questions, you’re not alone.
According to FICO as reported by CNBC, cardholders with “exceptional” credit scores—above 800—have an average of three open credit cards. Ultimately, the perfect amount of credit cards for you comes down to what you’re comfortable with and what you can realistically manage.
Here, we’ll discuss some instances when you may want to consider adding another card—and when to hold off. Remember to consult your financial advisor if you’re ever unsure of the best move.
When to Consider Adding a Card
If you have zero cards or one card: Having a variety of credit accounts is important. This means incorporating a mix of things like credit cards, auto loans, mortgages, and student loans. If you don’t yet have a credit card, consider applying for one to diversify your mix.
If you only have one, it may be beneficial to add another to show lenders that you’re capable of managing multiple accounts and paying them on time.
If you have no trouble managing accounts: Some people have a hard time keeping track of multiple credit cards. If you’re able to stay organized and keep track of relevant account information, having multiple credit cards will be a less risky move. As long as you’re paying all your accounts on time, you shouldn’t have a problem with three or more credit cards.
If you’re not earning rewards or benefits: Maybe you’re still using the first credit card you ever applied for years ago. If it doesn’t have a cash back or other rewards program, you may be missing out on free money. Additionally, if your credit score has improved in recent years, you may be able to apply for a card with a lower interest rate.
When to Hold Off on Adding a Card
If you have debt: According to a 2019 survey from CNBC, approximately 55 percent of cardholders have debt. Instead of adding another card—increasing the temptation to rack up a hefty balance—consider shifting your priorities to paying off debt. A smaller debt load has psychological benefits and increases your chances of getting approved for a line of credit in the future.
If you’re struggling to keep track of your cards: If you’re finding it hard to remember payment due dates or keep track of balances, it’s probably a sign you’ve reached your credit card capacity. Staying organized is the key to success with multiple credit cards.
If you’re about to apply for a loan or mortgage: If you’re planning on applying for a large or important line of credit, hold off on taking any action that could affect your credit score. Lenders like to see that you have a steady credit history, and applying for a new card may cause a temporary dip in your score.
Does Having Too Many Credit Cards Hurt Your Credit?
No, the number of credit cards you have doesn’t directly impact your credit score. Whether you have seven cards or one, two basic principles of good credit management remain important: monitoring credit utilization rate and limiting hard inquiries. These factors do have the potential to substantially impact your credit score.
Pay Attention to Credit Utilization Rate
One of the main benefits of having multiple credit cards is that your combined total credit limit will increase. This is very useful when you’re aiming to stay below the recommended 30 percent credit utilization rate, or the percentage of your total credit limit currently in use.
For example, having only one card with a $3,000 limit doesn’t give you much leeway in terms of how much you can charge. If you were to charge the full $3,000, you would max out your card and likely lower your credit score. However, if you were to add two more cards with the same limit, your total credit availability would now be $9,000.
This would allow you to charge up to a total of $3,000 while still staying at or below the recommended 30 percent credit utilization rate.
Like all things, it’s best to find a balance. Adding multiple cards too quickly in order to boost your total credit limit may trigger hard inquiries.
Limit Your Number of Hard Inquiries
A “hard inquiry” is a notation on your credit report caused by an official request by a lender to view your credit report. Hard inquiries typically occur when you apply for a credit card, loan or mortgage. They have the potential to lower your credit score, especially if you incur too many in a short amount of time.
A single inquiry may only lower your score by a few points. However, if you have very few credit accounts or a short credit history, the effects may be more substantial.
If you’re looking to apply for multiple credit cards, space them out over a period of six months or longer. Only apply for cards you know you’ll be approved for—or better yet, get preapproved. This means that a credit card issuer may approve you for a card based on income requirements and won’t have to pull a hard inquiry.
In addition to monitoring credit utilization and limiting hard inquiries, remember to keep other credit management best practices in mind:
- Pay at least the minimum balance—on time and every time—for all of your credit cards.
- Keep a good mix of credit accounts—cards, auto loans, a mortgage, and student loans, are a few examples.
- Build a long history of good credit management by keeping accounts open.
Is It Better to Cancel Unused Credit Cards or Keep Them?
If you have a pile of credit cards that have gone unused, it may be tempting to cancel the accounts. However, this is typically more detrimental than it is beneficial. To build a long history of good credit management, aim to keep your credit accounts open.
Use your cards every once in a while—even if it’s just for small purchases—to avoid them being canceled. Since credit card issuers aren’t all required to notify consumers of a card cancelation, an unexpected cancelation may result in a credit score dip.
When to Consider Canceling a Credit Card
If the card is newer: If you absolutely need to cancel a credit card, it’s better to close a newer one than an older one. Since length of credit history accounts for 15 percent of your credit score, you’ll want to keep old cards with a long payment history. With newer cards, you haven’t built up that history, so canceling may not be as detrimental to your score.
If the card has a lower limit: Whenever you cancel a credit card, your total available credit will decrease, which in turn will also decrease your utilization rate. This is the main factor that lowers people’s credit scores after canceling a card.
Canceling a card with a low total credit limit will put you at the least amount of risk for going over the 30 percent utilization rate. And if you do cancel, make sure your utilization rate on your other cards is low.
If the card has high fees: Cards with annual fees or extremely high interest rates may be making it more difficult for you to make regular on-time payments on all of your cards or pay off other debts. Even though canceling a card may result in a temporary dip in your credit score, it’s best to consider your overall financial health and debt load.
Always consider what’s best for your unique situation—and if you’re ever unsure, consult your financial advisor. Improving your credit score, especially when you have multiple cards, can seem like a daunting task. If you don’t know where to start, Lexington Law can help. Explore our credit repair services to see if they’re right for you.
Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.
Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.