On average, Americans that actively use credit cards to make payments have 3 credit cards. Collectively, Americans make billions of credit card transactions – with good reason! Credit cards offer more secure forms of payment (try paying cash online!); credit card perks and benefits that can save you money on things like travel and price reductions; and, allow consumers to make payments, partial and full, at later dates. Plus, they build your credit score, which factors into how much lenders are willing to lend you or more favorable conditions when asking for a mortgage.
However, it doesn’t take a genius to realize that credit cards can get out of hand, with Americans owing over $700 billion in credit card debt. Despite these staggering numbers, how many credit cards should you have? The answer is a bit subjective, as it is based on your credit usage, financial habits, long-term planning, and other factors. In this article, we’ll look these factors so you can determine how many credit cards you should own.
Determining the Right Amount of Credit Cards
It helps to have an understanding of your financial needs and habits when determining how many credit cards you should have in your wallet. Honestly, there are no limits to how many credits you can have, but there is a reasonable amount of credit cards that you may want to consider carrying. These following questions will help you get a better idea of that number.
What kind of credit card benefits are you looking for?
One of the main reasons that you should have multiple credit cards is to take advantage of the credit card benefits programs and protections that almost all major issuers offer. You can earn money as you spend or accumulate points that can be used for purchases, like first-class airline travel. Using Sift, you can automatically keep track of these benefits and perks so that more money stays in your wallet.
Purchases made with credit cards also come with protections that can help save you money or extend the life of your items. Many credit cards come standard with the following benefits:
Using Sift, you can receive alerts that show you when these protections on your purchases are still available.
Do you have a financial backup for emergencies?
Having more than one credit card can be useful to bridge the gap when you may be anticipating a financial shortcoming, like overdue bills, home repair, or an expensive restaurant bill. It’s also useful to carry more than one credit card in the case that your other credit card is overcharged.
Do you and your spouse share finances?
It’s hard enough to keep track of your own finances when using credit, but it can be downright confusing if your spouse is making purchases on the same card(s). Many couples opt to have their own his-and-her credit cards that not only keep financials separate but offer specific rewards to each person’s lifestyles. For instance, men might not find having a department store credit card’s rewards program as a useful perk. Vice versa, a stay-at-home parent might not want to have their purchases go towards building travel points.
Are you trying to build your credit?
If you have several credit card accounts in good standing, your credit score will naturally increase. Prospective lenders look to see how you manage small loans of credit when assessing how worthy you are for larger loans. Credit cards are an excellent tool for building this credit, especially if you have old accounts in good standing and your credit utilization is in an acceptable range.
How good are you at managing multiple accounts?
If you’re taking out multiple credit cards, it means that you will have to deal with multiple accounts. Multiply by this by taking out credit cards from different issuers, and you may find that paying bills on time can be maddening! Of course, you’ll want to ensure that you pay off the outstanding balances each month to avoid getting zapped by late fees and interest charges, but you’ll also have to do some juggling between accounts to ensure that there’s enough money—even with automatic deductions from your debit or savings accounts. If organizing your finances is too much of a hassle, you may want to stick with just one or two cards, preferably from the same issuer.
What types of purchases do you make most often?
Owning multiple credit cards can be a great way to build points and earn cash-back rewards if you intend to spend your money in a deliberate manner. For instance, many credit cards offer cash-back rewards if you intend to use the card for travel, gas, department stores, and beyond while excluding purchases that may not be eligible from certain retailers (e.g., Walmart is not considered a department store.) Other purchases may be excluded by the issuer, but if you use a credit card with the purpose to build rewards, then you may want to consider taking out credit cards with those purposes specifically in mind.
Do you already have credit card debt?
Lastly, another benefit is that some credit cards allow you to transfer your preexisting benefits to another card, often at a 0% interest rate—a strategy that can alleviate some of your accumulating debt.
How Many Credit Cards Is Too Many?
To accurately weigh how many credit cards you should own, it helps to take consider when you have too many credit cards. There are several reasons why having too many credit cards can backfire and overwhelm you in debt:
Are you a bit of a shopaholic? If you feel that the temptation to responsibly manage your credit card spending within limits, you may want to keep your credit cards to a bare minimum. After all, it is easier to swipe than to have to part with hard-earned cash. If you spend beyond your means to reasonably pay back your debts, you may find yourself hit with fees and interest rates than spiral out of control. Your lack of self-control can easily have you paying even more than you would consciously spend.
Too many credit card fees
Credit cards are usually full of hidden fees that seem to appear out of nowhere. You may be charged for annual fees that you’ve long-since forgotten about since opening a new account (especially if it was a $0 introductory offer). Additionally, you may have taken out the credit card to use that would make up for the fees, but it can be difficult to remember if you’re actually using the card enough to reimburse you for those fees.
Owning multiple credit cards is a personal decision based on your lifestyle, personality, and financial outlook. Credit cards are more than just free money. Using them wisely can secure your financial future, offer great rewards, and offer a buffer should you fall behind on bills.