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How Many Credit Cards Is Too Many?

Credit cards are essential for building credit and affording high-cost expenses. But how many credit cards is too many? Learn how credit cards affect your credit score and if you should consider closing some accounts. 

How Many Credit Cards Do Most Borrowers Have?

Are you worried about having multiple credit cards? If you want to achieve a perfect credit score, you may wonder if having too many credit cards is possible. What is the average number of credit cards a borrower has in the United States? According to Experian, most millennials have 2.5 credit cards while most baby boomers have 3.5. 

There is no exact number of credit cards you should have. However, if you currently have multiple cards, it’s critical that you can manage all of those credit card accounts. Suppose you repeatedly make late monthly payments because you can’t keep track of due dates. In that case, it’s time to consider closing or consolidating credit card accounts. 

The Benefits of Having Multiple Credit Cards 

Having more than one credit card can benefit your credit score and wallet. Learn how you can benefit from having multiple credit cards below. 

Save Money on Purchases 

Consumers can earn credit card rewards through points or cash back. Point-based rewards programs let you earn money by making qualifying purchases. Those points can be exchanged for gift cards, cash, or travel. Cash back rewards cards allow you to earn spendable cash through qualifying purchases. You can redeem cash back rewards through statement credits, checks, or at certain retail websites. Depending on the credit card issuer, you may be able to earn additional rewards by using your card at specific places, such as gas stations. 

Increase Your Credit Utilization Rate

According to the credit score algorithm, credit utilization accounts for 30 percent of your total score. A credit utilization rate is the amount of debt you have compared to your credit lines. Multiple credit cards can increase your overall credit limit, positively impacting your credit report. 

To calculate your utilization ratio, divide your total credit card balance by your total credit limit. Multiply the answer by 100 to get your ratio as a percentage. If your credit utilization ratio exceeds 30 percent, obtaining an excellent credit score will be incredibly difficult. 

Improve Your Credit Mix

Credit mix accounts for 10 percent of credit scores. A diverse portfolio of multiple revolving and installment credit accounts can help boost your credit score. Having more than one credit card can look good on your credit report. Lenders tend to view borrowers favorably when they can manage multiple accounts. 

Reduce Credit Inquiries 

Applying for new credit lines can have a negative impact on your credit score because the number of credit inquiries you make accounts for 10 percent of your credit score. Making more than six hard inquiries within one calendar year can decrease your score and limit your financial options. Multiple cards give you more money to spend, so you don’t have to apply for new accounts.

Does Closing Credit Card Accounts Affect Your Credit Report?

If you think you have too many credit cards, you may consider closing an account or two. But does closing a credit card account affect your credit report?

Closing a credit card account can negatively impact your credit score. Why? Account closures increase your credit utilization ratio by decreasing your available credit limit. If you use more than 30 percent of your available credit, your credit score can cause your credit score to fall by a few points. Having several credit card accounts can benefit credit scores because borrowers have a larger credit limit. 

When you close an account, you also affect the length of your credit history. The longer you manage a financial account, the better your credit score will be. The length of your credit history accounts for 15 percent of your score. Suppose you want to close one of your oldest credit card accounts. An account closure can end up having a drastic impact on your credit score. Managing multiple credit accounts can help you obtain and maintain a stable credit history. 

But if you want to learn how to close a credit card, the first step is to finish paying off your current balance. Once your credit card balance is zero, ensure you cancel any recurring payments and check to see if you have rewards to claim. You can call the credit card company or cancel through your online account to initiate an account closure. You will receive an electronic or paper confirmation that your account was closed. Keep an eye on your credit report to ensure the account’s status changes.  

Should I Ask My Credit Card Issuer for a Limit Increase?

When you don’t have enough available credit to spend, you may think about applying for a new credit card. But opening an account with a credit card company can decrease credit scores. To get approval for a new credit line, the credit card issuer must complete a credit check, which deducts a few points from your credit score. If you want more money to spend, consider increasing your credit limit instead.  

After opening a credit account, credit card issuers will monitor a borrower’s financial activity. Suppose you continuously make payments on time and keep a low credit card balance. In that case, you may unexpectedly get a credit limit increase after a few months. But if you have not yet received a limit increase, you can request one. Call the credit card company and speak with a customer service agent. 

Card issuer’s grant limit increases for various reasons, such as:

  • When a borrower’s income increases
  • When a borrower has no missed or late payments
  • When a borrower maintains a low debt-to-credit ratio
  • When a borrower’s credit score increases

If you do not receive a credit increase, you can ask why. Typically, borrowers are denied a limit increase due to late payments, high credit balances, and decreased credit scores. If you already received a credit increase, it may be too soon to request another. Most credit card companies do not provide more than two annual credit limit increases. 

Can My Credit Limits Decrease With Too Many Credit Cards?

Do you have so many credit cards that you don’t use all of them? When a credit card goes unused for an extended period, the lender may close it on your behalf. Account closures decrease your total credit limit, which can, in turn, lower your credit score. 

The amount of time it takes for an inactive account to close varies depending on the financial institution. You may receive a notification through your online account or the mail before an account gets closed, but most borrowers do not. Credit card companies are not required to notify you before they close your account. The Credit Card Act of 2009 states that a lender must provide a 45 days notice of major account changes, but this does not include canceling an inactive account.  

If your account gets closed but you want to keep it open, you can contact the credit card issuer. Your credit account may get reinstated if you had excellent payment history before the closure. Still, you may have to agree to another credit check.  

How to Successfully Manage Multiple Credit Cards

In order to successfully manage multiple credit cards, it’s essential to stay on top of payments. Most borrowers who struggle to manage multiple credit cards cannot keep track of due dates and inadvertently miss payments. Your payment history is the most critical factor for credit score calculation, as it accounts for 35 percent of your total score. 

Late payments can negatively affect your credit score and stay on a credit report for up to seven years. Consider signing up for automatic payments if you manually pay credit card bills online every month. When you sign up for automatic payments, you can choose how much on the due date. You can choose to pay the billing statement, the minimum, or the minimum plus an additional amount. You do not have to worry about missing payments or late fees since the payment amount is automatically withdrawn monthly. 

You can call your credit card issuer to change the due date if you pay your credit cards on different dates. Having the same due date for multiple cards can make it easier to avoid missed payments. The only downside is that you may only have enough money to make minimum payments for multiple cards within the same week. Just ensure you make additional payments when you can to work on paying down credit card debt. 

The Bottom Line

The answer to the question, “How many credit cards is too many?” varies because everyone’s financial history is different. Having multiple credit cards is not a problem unless you constantly miss payments. 

Late payments can negatively affect your credit score. If you miss payments constantly, you may benefit from credit card consolidation. Consolidating credit card debt is when you merge multiple credit accounts using another credit card with a higher limit or loans with monthly installments. This way, you only have one monthly bill to pay instead of several. Debt consolidation can help you avoid late payments if you have trouble keeping track of too many due dates. 

But keep in mind that closing credit card accounts can increase your credit utilization rate. Consumers actually benefit from having too many accounts because having more money available than you use increases your creditworthiness. Keeping your credit card debt low and managing multiple cards shows lenders that you are financially responsible. As long as you can comfortably handle all of your credit cards, you do not have to do a thing. 

References:
How Many Credit Cards Should I Have?
Inactive Credit Card: Use it or Lose it?