Money

Can you have too many credit cards?

Is more always merrier?

Man holding a credit card Credit: Getty Images / Nicola Katie

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It can be tempting to apply for a new credit card, especially with the promise of rewards like cash back, miles, or points toward free travel. And if you have good credit, the offers are plentiful and competitive.

But there are several factors to consider before opening a new account. Some cards with great benefits come with high annual fees that may outweigh the value. For those building credit or with lower credit scores, credit card companies only offer high interest rates. Not to mention, depending on your financial habits, new lines of credit can lead to overspending.

Maybe you’re looking to apply for a new credit account, or you’re wondering if you’ve overextended yourself. Here is some expert advice on how to weigh the advantages and disadvantages of choosing a new credit card to add to your wallet.

How many credit cards do experts recommend having?

Unfortunately, if you’re looking for a concrete number, you won’t find one, as an individual’s credit history, income, age, and other factors play a role. “The answer varies from person to person,” says Monica Eaton-Cardone, co-founder of Chargebacks911, a company that's protected over 10 billion credit card transactions for consumers and retailers.

“Having more lines of credit is beneficial to your credit score, as it lowers your cumulative utilization ratio. The more credit that’s available to you, the more appealing you are to creditors,” Eaton-Cardone explains.

For example, when it comes to your FICO score, your credit utilization ratio is more significant than the total amount of debt you owe. She adds this disclaimer: “It’s only a benefit, however, if you’re able to maintain a low rate of credit utilization.” Experts recommend keeping this at 30% or less.

While there is no straightforward answer to how many credit cards you should have, the general guidance is relatively simple: “Ultimately, the best answer is to have only as many cards as you can manage responsibly.”

How do you find your personal sweet spot?

To determine the number of credit cards you can manage, Eaton-Cardone says, “Some of the most important factors to consider are your consumer habits, your income, and your experience with credit in the past.”

“Young consumers who are just beginning to build up a credit history won’t really need a large portfolio of credit cards,” she continues. Instead, new credit users should first focus on maintaining one card, so they can learn responsible behavior over time.

For more experienced credit card users, take an honest look at your payment history. Taking on too much can negatively affect your credit score. But if you have a handle on your finances, it can be beneficial to maintain a balanced variety of multiple credit cards. “Choose cards that compliment how you live,” Eaton-Cardone says. “For instance, if you travel frequently, choose a card that provides flight or hotel rewards.”

What should you consider to make a smart addition?

Smart credit cards choices are indeed out there, but finding the best fit takes research. When choosing a new card, pick the best one that caters to your needs and lifestyle.

Eaton-Cardone explains that while the APR (whether fixed or variable) is important to know, if you’re a responsible credit user—meaning you only charge what you can pay off each month—it’s actually not a major concern.

“It’s more important to be cognizant of annual fees, and how those costs stack up against the benefits of the card. You should think about your consumer habits, and consider whether it makes sense for you to choose a particular card,” Eaton-Cardone says.

Perhaps you’re a globe-trotter, but you carry cash while abroad because your card charges a foreign transaction fee. You might want to look into a travel credit card that comes with perks not currently at your disposal. Or, if you spend a lot of money with a particular brand, they may offer a card with significant rewards.

It may also make sense to add a different payment processing network to your wallet. If you have an American Express card, for example, consider choosing an issuer that uses Visa or Mastercard for instances when a retailer may not accept AmEx.

What are the downsides to opening a new credit card account?

All of these perks may sound great, but they could come with a catch.

In some instances, enticing offers like a 0% APR for the first year could be a valid reason to sign up for a new card, especially if an expensive purchase or project is in your near future. In this case, the credit card will give you a 12-month grace period before charging interest on a revolving balance. After, a variable APR—often a hefty one—kicks in if you carry a balance.

Temptation tends to get people into trouble with credit cards, especially if they are prone to mismanagement of money or have a history of overspending.

Other sign-up bonuses may include free airline tickets or cash back. These generally require a spending threshold like $3,000 in the first three months of opening the account. While a few extra bucks in your pocket sounds nice, this race-to-spend mindset can be troublesome.

“A credit card is a useful tool, and it can be a lifeline in an emergency situation,” Eaton-Cardone explains. But indulging impulses to spend can become a slippery slope, even leading toward out-of-control credit card debt. “It may take years for you to dig your way out,” she cautions.

Can you have too many credit cards?

As long as the accounts are in good standing, and responsible use is maintained, Eaton-Cardone says, generally, she’d advise against closing accounts.

Let’s say you have six cards, but only use one or two on a regular basis. It would be worthwhile to keep those additional lines of credit active, as it boosts your overall credit score.

“The length of your credit history and your credit utilization ratio are two of the primary factors that comprise your score. So, if you have a card that you applied for years ago, but never really use, closing the account could negatively impact both of those metrics and cause your score to drop,” she explains.

“My rule of thumb is to keep those accounts open. Just make the occasional purchase, and pay it off right away, so that you benefit from having them in your profile of credit lines."

To be cautious, set monthly reminders to check accounts you use less frequently, and keep an eye out for unexpected fees so that they don't go unpaid.

Bottom Line

Although it can be enticing to open a new credit card with the promise of rewards, cash back, or travel incentives, do your research. Discounts and bonuses are valuable, but do potential fees or high interest rates make the card worthwhile? "When looking at benefits, the primary matter to keep in mind is whether it will ultimately save you money to have this card,” Eaton-Cardone says.

The amount of credit cards you have is a personal decision, but smart management is key to maintaining healthy credit. Before applying, check your free score to see where you stand, and keep regular tabs on your credit report to address any issues as they arise.

“I want to underscore the importance of balancing the number of cards in your wallet against your limitations,” she adds. “If you don’t have the bandwidth to manage 10 cards effectively, you should not have that many. At the end of the day, your lifestyle, income, responsibility, and buying habits will determine the best number of accounts to maintain.”

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