How Many Credit Cards Should You Have?

25 Dec How Many Credit Cards Should You Have?

According to a Gallup poll, 71% of Americans have at least one credit card, with 34% owning three or more. Since the number of credit cards you should ideally use varies individually, it’s nearly impossible to determine the “perfect” number of cards for every person. However, your spending habits, financial goals, and current credit score can help you decide the right amount of cards for your bank account. There are benefits associated with using both fewer or additional cards, but your ability to pay off credit card debt will help determine how many cards are financially healthy.

Benefits of using fewer cards:

Stay out of debt

The average American household owes $15,000 in credit card debt, a staggering number when you consider the additional student loan, mortgage, and car debt which plague most adults. The fewer cards you have, the more likely you are to stay out of credit card debt since one or two cards are relatively easy to keep track of. High-interest rates, which average at 15%, make credit card debt even more damaging to your credit score, since you may fall into overwhelming debt that you can’t pay off.

Pay on time

If your credit statements come once or twice a month, it is much easier to make payments on time since you can budget in advance. Even with reminders pinging your phone, planning for all five times a statement comes in the mail each month is tougher to manage. This is another reason why using fewer cards can help you stay out of debt. If you become overwhelmed with billing statements, then both your bank account and your credit score will suffer.  

Reduce hard inquiries

If you are planning on buying a house, car, other other large purchase, you may want to consider holding off on applying for a new credit card. Whenever you submit a request for an additional card, the potential lender will immediately check your credit score to determine your risk level. This “hard inquiry’ can suddenly lower your credit score by as much as five points. If you apply for multiple cards over time, it can negatively impact your score.

Benefits of using more cards:

Have backup cards

Backup cards are especially useful when you travel out of the country. Since n0 credit card company is universally accepted, you will be out of luck if you can’t pay with the single card you carry. As opposed to a debit card, an extra credit card is better suited for large purchases that you need to pay off over time. If your credit card is stolen or compromised, a backup card can cover your expenses while you wait for the company to mail your new card.

Earn rewards

If you decide to use multiple cards, make sure you are taking advantage of the company’s reward plan. Since the market for credit cards is highly competitive, many companies are offering incredible rewards programs to new cardholders and longtime members. If flights, hotels, gas, or groceries are some of your main expenses, consider getting a card for each activity that offers discounts or cash back. Keep in mind that the best rewards cards demand a high credit score, so you may have to start small if you are in the process of building your credit.

Keep purchases separate

Some financial advisors recommend using separate cards for work and personal expenses. As long as you are able to pay all of them off, multiple cards can help your credit score by increasing the amount of available credit you can access (but keep in mind the hard inquiry problem mentioned above). It may be easier to divide up your expenses and carefully manage each account. This strategy is kind of like the cash envelope budgeting system, but with credit cards.

So how many credit cards should you have? It depends on if you have the time to invest in learning about rewards programs and can keep track of making payments on four different cards. Are you trying to raise your credit score or maintain it? Are you financially responsible and able to pay off each card on time? At the Bank of the Lowcountry, we want to help you make sound financial decisions. But we understand that mistakes happen. That’s why we offer credit cards with no annual fee and a 25 day grace period for paying off your balance. Give us a call today at (843) 549-2265 to open a bank account, apply for a credit card, or to talk to an expert about your financial goals.