by The common wisdom about credit cards is that you should avoid them and sign up for as many as possible to maximize your financial health.
How can you find the right number? Are you ready to apply for credit cards right away? Or can you wait until the numbers are more stable? The answer is complex, as with many personal financial issues.
How Many Credit Cards Should You Have?
There is no one right number of credit cards that will work for everyone. The number of credit cards that you should have will depend on your financial situation, your goals, and your preferences.
A small number of cards is what many people consider the best. Experian data shows that the average American has between three and four credit cards.
This doesn’t necessarily mean that this number is the best for everyone. Some people may prefer to have one or two cards. On the other end, credit card optimizers and travel hackers can earn lucrative rewards by using a dozen cards or more.
Effective money management is not always easy. The best solution will be the one that you choose for your life. Before we get to that, let’s consider the trade-offs involved in managing multiple credit cards simultaneously.
Multiple Credit Cards: The Benefits
A wallet that contains at least one credit card can be a boon for your finances in many ways. The majority of modern credit cards offer a variety of benefits.
- Cash sign-up bonuses
- Points, miles or cashback
- Exclusive discounts, memberships, and deals are available
The simplest way to look at it is that the more cards you have the greater your exposure to various benefits. Although things can be more complicated than this in practice, stacking rewards is worth looking into.
FICO scores can be improved by having more cards, as long as you pay all your bills on time and maintain good standing with all your accounts.
One, having more lenders and credit lines in good standing can help you build credit. Every new credit line you open will result in a higher credit limit overall and a lower card utilization rate. Card companies love it when cardholders use a low percentage of their credit limit.
There are downsides to having too many credit cards
Aside from the cash rewards and stellar credit ratings, it is not wise to apply for multiple credit cards without considering the potential risks. The disadvantages of having too many credit cards can be both inconvenient and financially dangerous.
One thing is that managing credit and debit cards can become a tedious task. It can be difficult to keep track of all the accounts that you have. This can be somewhat alleviated by using online budgeting tools or tools with features such as autopay and electronic statements, but it won’t eliminate the problem.
Additionally, having too many credit card accounts could pose a risk to your financial well-being. Multiple accounts can lead to high fees and penalties. Additionally, it is easier to make billing mistakes due to the complexity of bookkeeping. You may also have poor credit due to late payments or accounts in poor standing.
You should be aware that you may have experienced difficulties managing your credit cards in the past. The addition of cards can make these problems worse, not better. You can get professional help by hiring a certified credit counsellor to work with you to reduce your stress and debt.
Here are a few things to consider
It is not a one-size fits all approach to choosing the right credit card for you.
Consider the following factors carefully and use them to determine the best credit card for you.
Where can you use your credit cards?
Your credit card transactions may influence the number of cards you choose.
If you are averse to cash or debit cards, one card might be sufficient. You would only need a credit card for emergencies or infrequent purchases. If you want to maximize your benefits and rewards, it is probably best to have several credit cards.
What are the top expenses in your budget, other than housing? It will likely include the following:
- Groceries
- Dining out
- Entertainment
- Shopping
- Transport and gas
- Travel
You can get specialized rewards on credit cards for specific spending categories, and many others. People find that rewards cards can help them repay a portion of their spending in two or three of these categories. It’s not too difficult to manage.
Your Credit History and Credit Score
Creditworthiness can be affected by how many credit cards you have. Your credit score can also influence the cards you are allowed to have.
It will be more difficult for you to get the best interest rates and credit cards if you have poor credit or bad credit history. This could also indicate that you are not the best person to manage multiple cards.
While adding more cards to your financial system can help you build your credit score, it can also make your life harder. It is important to review your credit report before you increase or decrease the number of cards that you have.
Optimizing Vs. Simplifying
The debate between optimization and simplicity has been a constant in the personal finance community.
There are many areas in money management that one can choose from, such as debt and investing. You have the option of pursuing things mathematically optimally or opting for simplicity and emotional peace.
Most of the time, we choose to be somewhere in the middle. One example is credit cards.
You will likely reap some benefits by only having one or two credit card accounts. You will have fewer bills to keep track of, less to think about which card to use when and a lower chance of having a poor payment history.
You may be able to earn significant rewards and credit with all three major credit bureaus by having many credit cards. To optimize your credit card situation, you will need to do extensive research and bookkeeping. You also need to pay attention to what times you use which payment methods.
This is a case where you might be able to look at other areas of your life to guide you.
Are you more inclined to simplicity or optimization? Or a combination of both? This historical preference will likely cause you the most internal difficulties when aligning your card selections.
Fees And Penalties
Credit cards with fees are a common way to get into trouble, especially for people with poor credit.
There are many great credit cards available that come with no annual fees. There are no late fees if you use your card responsibly and pay your balances on the due date.
While fees are not the only thing you should be looking at when considering adding a card to your credit line, they are worth your consideration.
One or two cards that have an annual fee may make sense. Annual fee cards are easy to earn with the benefits they provide. It would be more difficult to break even if you have eight accounts that are subject to annual fees.
It is worthwhile to review your bill-paying history. It’s a shame to fall behind on one of your credit cards with late payments. But falling behind on six credit cards is a nightmare waiting for you.
Fees may not be a major factor for a disciplined credit card user. If we all were highly disciplined credit card users, credit card issuers around the world wouldn’t be able to make a profitable business model.
Find the right number of credit cards for you
Everybody wants to know how many credit cards should they have for maximum rewards and financial health. It is possible to find a number. It’s just that each person will have a unique number.
Credit cards are like many other areas in personal money management. There are so many options. This can seem overwhelming at first, but it’s a wonderful thing. There are many options available to everyone so that they can find the right fit and balance in their lives. You can determine the best credit card combination for you with a little bit of knowledge and foresight.
