Having multiple credit cards may or may not be a bad thing, depending on how you use them and your existing credit profile. A credit card can be a useful tool if used correctly. If not used correctly, it can lead to large amounts of debt, low credit scores, an unfavorable credit report, and other consequences.
According to data from TransUnion, the average American has 2-3 cards.1 Read on to learn more about having multiple credit cards.
Can Multiple Credit Cards Lead to Bad Credit?
Credit cards are easy to get and can allow you to purchase things that you may not be able to without them. This is why many people get in trouble with their credit card debt. Having high balances on several cards will no doubt hurt your credit score.
Having multiple cards won’t necessarily lower your score, but having high balances on them might. If you have several cards and they all have very low, or ideally no balances, then you actually might be helping your score.
This is due to something called your “credit utilization ratio.” This is the amount of credit you’re currently using, compared to how much credit is available to you. Here is more information on credit utilization:
| Things to Pay Attention to With Credit Utilization | Description |
| Importance | Credit utilization is a critical factor in your credit score calculation, impacting up to 30% of your score. |
| Lower is Better | A lower credit utilization percentage (typically below 30%) is better for your credit score. |
| Calculation | Divide your total credit card balances by your total credit card limits and multiply by 100 to get the percentage. |
| Impact on Credit | High credit utilization can negatively affect your credit score, making it harder to qualify for loans and credit. |
| Responsible Use | Keeping credit card balances low and paying them off in full each month can help maintain a healthy credit utilization rate. |
| Monitoring | Regularly monitoring your credit utilization and managing your credit card balances is essential for good financial health. Also be mindful of your credit limit. |
An example of credit utilization may be helpful. So if you have one credit card with a credit limit of $1,000 and you have a $500 balance on it, then your credit utilization ratio is 50%—because you’re using half the credit limit available to you. Let’s say you were then able to secure a higher credit limit with this credit card account; in that case, it would bring down that ratio.
Having low credit can make it hard to qualify for credit cards, but you can look at bad credit loans instead.
Is It Better to Have Multiple Cards or Cancel Them?
So the question remains, should you keep credit card options open even if you’re not using all of them? This brings us back to your utilization ratio. If you have a credit card or two with a zero balance, and you don’t plan to use them in the future, it actually helps your ratio to keep those credit card accounts open.
It’s beneficial to your overall credit score to keep your utilization ratio under 30%. The lower it is, the better. And having multiple zero-balance cards will lower your ratio.
Credit Cards With a Zero Balance
It makes sense that having less overall debt would mean you’re more financially stable. This is an important factor when it comes to calculating your credit score. And it’s an unfortunate fact of life that credit cards often lead people into large amounts of debt.
While it may be beneficial to your credit score to keep a couple of credit card options open with a zero balance, you have to know that you can keep them at zero. If having those cards open and available will lead to racking up more debt, then it isn’t worth the risk, and you should close them.
How Many Credit Cards Is Too Many?
The basic rule of thumb with credit cards is that how you use them is more important than how many credit cards you have.
That being said, be careful when opening and closing accounts with credit cards. When you open a new credit card, the company may perform a credit check to make sure you’re trustworthy. Sometimes these credit checks can lower your score by a few points. As long as you’re not doing this very often, it shouldn’t affect your credit too much.
So, is it a bad thing to have multiple credit cards? The short answer is no. The more thorough answer is that multiple cards can help you or hurt you, depending on how you’re using them. Unlike installment loans such as personal loan options, credit cards make it easy to overspend. Do your best to keep your overall credit card debt low and your balances at zero, and you may see your credit improve.
FAQS on Multiple Credit Cards
Here are answers to commonly asked questions about how many credit cards a person can have and having multiple credit cards:
Yes, keeping multiple cards open with zero balances can benefit your credit utilization score, thus potentially helping improve your credit score. Low credit utilization indicates responsible credit card use and is seen favorably by credit card companies and credit scoring models like the FICO credit score.
Not necessarily. Keeping cards open, even if you’re not using them, can positively affect your credit utilization and credit history. However, if you believe having those cards might tempt you into accumulating debt due to your spending habits, it may be best to close them. Consider your financial situation and spending habits carefully before making a decision.
Yes, when you open a new credit card, the credit card issuer may perform a credit check, which can occasionally lower your credit score by a few points. It’s essential to be cautious about frequently opening new accounts, especially if you’re planning to apply for significant credit, like a mortgage, in the near future.
It’s generally recommended to keep your credit utilization under 30%. Maintaining a low ratio by using credit cards responsibly can help you achieve and maintain a good credit score, which can save you money on interest rates and offer benefits like lower annual fees.
Unlike installment loans, which have fixed monthly payments, credit cards offer more flexibility in spending. While this flexibility can be convenient, it also makes it easier for individuals to overspend and accumulate credit card debt. Responsible use of credit cards involves monitoring your monthly payments and not just focusing on minimum payments.
It’s essential to understand that the number of cards you have is less critical than how you manage them. Ensure you can maintain low balances, make timely payments, and manage your credit cards responsibly to avoid negative impacts on your credit score. Additionally, consider whether the new card offers benefits that align with your financial goals.
Yes, the length of your credit history, which includes the age of your oldest account and the average age of all your accounts, can impact your credit score. Older accounts can be beneficial for your credit score as they demonstrate a longer credit history, which can contribute positively to your credit report.
If you’re considering closing a credit card, you might want to think about closing newer accounts first, as older accounts can positively influence the length of your credit history. However, always consider the impact on your credit utilization ratio before closing any card, as it’s an essential factor in your credit score calculation.
Yes, while there can be benefits to owning multiple credit cards, there are also risks. Multiple cards might tempt some individuals to overspend, leading to higher debt. It’s also essential to manage and track payments for each card to avoid late fees and interest charges. Responsible use of multiple credit cards involves staying on top of your monthly payments and spending habits to maintain a healthy credit score.
The Bottom Line With CreditNinja: How Many Credit Cards To Have
How many credit cards you should have, or at what too many credit cards look like, is something that many people may be curious about. This topic may be especially important if you already have multiple cards and are getting even more offers from credit card issuers. The thing is that it’s difficult to pinpoint a number for too many credit cards. What is more important with credit cards is how you decide to use them and pay them back, along with your credit portfolio.
Credit cards can be a great tool for building credit, but they should be used carefully, and credit building without a credit card is possible. There are a few key things to pay attention to with credit cards, such as your credit utilization, spending habits, interest, and your payment history. Out of these factors, payment history and credit utilization score or ratio will have the greatest impact on your credit—a late payment can hurt your payment history and stay on your credit reports for up to seven years. While high credit utilization can bring down your score. To learn more about credit cards and other aspects of credit, loans, and financial literacy, check out CreditNinja’s Dojo!
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