How Many Credit Cards Should You Have?

Credit cards are a convenient answer to avoiding the hassle of cash and loose change. If you already have one credit card, you might be curious if there are benefits to having more than one — especially if your current credit card lacks rewards. Here’s what you should consider when determining the right amount of credit cards for you, based on your spending habits, financial goals and lifestyle.

The benefits of having a credit card

Credit cards are a great way to establish your credit history, which is essential if you ever hope to get approved for a mortgage or auto loan. Credit cards allow you to pay for purchases over time, with the caveat of paying interest on your revolving balance.

Many credit card issuers also offer a range of different kinds of safeguards you’ll be hardpressed to find elsewhere. Credit cardholders might enjoy complimentary features such as credit monitoring services, fraud protection, price protection, purchase protection and even return protection. Some credit cards also boast an array of travel benefits.

Beyond merely using them to establish or maintain a healthy credit score, some credit cards offer a welcome bonus just for signing up. There are also plenty of cards that deliver rewards programs in the form of point systems, miles or other rewards for certain spending categories. If you’re a strategic financial type who isn’t afraid of a little legwork, you can maximize your rewards to save hundreds, if not thousands per year.

Risk vs. reward

While credit cards are certainly useful tools in many instances, there is – like with many other things – some risk involved. Just as credit cards can be used to bolster your credit score with responsible behavior like on-time payments, they can also hurt your score if you misuse them by racking up debt, missing payments and surpassing your credit limit.

More than 189 million Americans have credit cards, and on average, each household carries $8,398 in debt from them. Whether you have one card or seven, there can be a temptation to overuse them. It’s easy to make purchases without thinking when you can simply swipe a card rather than use cash. Using credit cards is even more painless than debit cards since they’re not tied to an amount in your checking account.

Another possible pitfall to avoid is overspending for incentives when signing up for a new card. Those incentives typically involve hitting a spending target within a set time period in order to obtain bonus miles, points or extra cash back. However, those opportunities can cause card users to spend atypical amounts to hit that goal, leading to a potentially outsized debt compared to the value of the reward.

Why does the accrual of credit card debt matter so much? Because you can quickly increase your debt-to-income ratio – the amount of total debt you have compared to the total amount of money you bring in. Ideally, you want to keep your debt-to-income ratio lower than 43%, as recommended by the Consumer Financial Protection Bureau.

Another related ratio your credit card debt could impact is your credit utilization ratio, which is the amount of credit you use compared with the total amount of credit you have available to you. If you overspend and max out or approach the credit limit on multiple cards, your credit utilization ratio skyrockets, making you a riskier borrower in the eyes of lenders. Experts recommend keeping your credit utilization ratio around 30% or lower.

It’s clear why credit cards can help you build a strong foundation for your financial health. The key is using them responsibly.

Is less more?

The answer to whether you should stick with one card or go for more depends on what kind of spender you are and what you’re looking for in terms of rewards. For users who prefer simplicity, a credit card offering a flat-rate cash back reward on all purchases might be an ideal solution. You never have to keep track of changing reward categories or figure out how you want to spend points to maximize their value.

However, if you decide you want more than one credit card, you can use multiple cards to strategically to make up for the rewards options that one card may lack. Let’s say you have a flat-rate cash back credit card. You may want another rewards credit card offering rotating bonuses on spending categories you’re likely to use, like gas or restaurants. This strategy involves more attention to detail, but it may leave you with more lucrative rewards and better savings.

Another benefit to having more than one card is the peace-of-mind that comes with knowing you have more than one basket to put your eggs in. A back-up credit card can be handy if your network isn’t accepted at a certain merchant (think Discover or American Express), or if your card issuer freezes a card to investigate potential fraud.

It’s important to note that if you want multiple credit cards, you should consider spacing out your applications for them. Why? If you apply for too many credit cards at once, your credit score may drop as a result. Credit card issuers conduct a hard pull on your credit history when you apply for a new credit card, which can temporarily lower your score. Although your score will rebound as long as you continue to practice responsible payment behaviors, it’s an effect you’ll want to consider before sending in several applications at once.

Paying for one and all

If there’s a golden rule of credit card usage, it’s should be to pay your bill on time. Paying your bill in full each month serves as evidence of responsible payment behavior. It also encourages you to spend within your means, rather than purchase lavishly while only paying the required minimum amount each month.

When you have just one credit card, it’s much easier to keep track of your bill payments. But things get a little more complicated when you’re trying to manage multiple credit cards and multiple payment due dates. If you decide to own more than one credit card, it’s critical to monitor all of your impending due dates and create a plan to keep track of them each month. Consider setting up calendar alerts or opting into bill reminder alerts through the credit card issuers to set yourself up for success.

In a nutshell

Credit cards offer tons of benefits, but only if you’re committed to spending what you can actually pay off each month. If you choose to use multiple credit cards, make sure those cards are complimentary so you can maximize your savings and rewards.

Michelle Wilson

Michelle Wilson is a San Diego-based writer specializing in the topics of personal finance, technology, and culture. You can find her writing on sites such as HP Tech Takes, The Simple Dollar, and San Diego Magazine. In her spare time, she enjoys finding new cats to follow on Instagram.