When used correctly, credit cards can be a powerful financial tool. They offer convenience, can help you maintain a good credit score, and earn valuable travel and cash back rewards.

But how many credit cards should you have? There are varying opinions; some people avoid using credit cards at all costs, while others juggle several cards to maximize convenience and the potential for rewards.

In this article, we’ll explore this question and share some pros and cons of having more than one credit card.

A Caution About Using Multiple Credit Cards

Before diving into the reasons for owning more than one credit card, I will share the following caveat. That is, while credit cards can be a helpful tool, if they’re not used properly, they can get you in some serious financial trouble.

Credit card interest rates are incredibly high, often 20% or more. If you cannot pay off your balance in full each month, things can quickly spiral out of control, and you may find yourself with a pile of debt that you can’t easily pay off. The interest will continue to accumulate, making the situation worse.

And credit cards are so convenient that it can be easy to overspend without realizing it. With that in mind, if you know that having more than one credit card, or even a high limit on a single credit card, will be problematic for you, then I strongly recommend that you stick to your gut instinct and limit your credit card usage. No amount of travel rewards points is worth the interest charges you’ll face.

The Benefits Of Multiple Credit Cards

Keeping the above caution in mind, here are four ways you can benefit from having more than one credit card:

Lower Credit Utilization

Having multiple credit cards can help you achieve and maintain a lower credit utilization ratio, which can positively impact your credit score. Your credit utilization ratio is calculated by dividing your total revolving credit balances by your total available credit. By having more credit cards, you increase your total credit limit, and as long as you don’t increase your spending proportionally, your overall credit utilization should decrease.

Earn Different Types of Rewards

Many rewards credit cards target specific spending categories, such as travel, gas, or everyday spending. By strategically using different cards for different spending categories, you can maximize the rewards you earn. For example, you can use one card for gas purchases, earning bonus points or cashback, and another for groceries, accumulating rewards specific to that category. It’s a great way to maximize rewards.

More Payment Options

Multiple credit cards means more payment options. Some cards may be more widely accepted at specific retailers or service providers, allowing you to choose the most convenient and cost-effective payment method.

Additionally, having multiple cards means you have more flexibility in managing your payment history, potentially avoiding late fees or interest charges by using different cards to manage your monthly expenses better.

Gives You a Back-Up Option

A second credit card can serve as a backup in case your primary card gets lost, stolen, or declined. That way, you won’t be left without a payment option in unexpected situations, which is always a good thing.

Drawbacks Of Multiple Credit Cards

I touched on the dangers of credit cards earlier. Here’s a closer look at the potential downsides of having multiple credit cards.

You May Be Tempted To Overspend

One of the risks of having too many credit cards is the temptation to overspend. When you have access to multiple credit accounts, you might be inclined to use them, even if you don’t need to. This can lead to unnecessary spending and cause you to accumulate debt that you may be unable to pay off. It’s important to be mindful of your spending habits and only use your credit cards for purchases that are within your budget.

Potential For More Fees

Many credit cards, especially premium rewards cards, charge annual fees. More credit cards means potentially paying more fees if you’re not careful. Make sure you’re aware of the fees associated with each card and avoid incurring unnecessary charges.

It Could Lower Your Credit Score

While having multiple credit accounts can help with credit mix and potentially raise your credit score, applying for too many cards at once or mismanaging them can also lower your score. Credit bureaus monitor the number of inquiries on your credit report and may view multiple applications within a short period as a sign of financial instability. Additionally, maintaining high balances across multiple cards can reflect poorly on your credit utilization ratio, a critical factor in determining your overall credit score.

Final Thoughts

So, how many credit cards should you have? It really depends on your individual financial situation and your ability to manage credit. If you have the discipline, having 2 or 3 credit cards can be beneficial for the reasons I mentioned in this article. However, too many cards may tempt you to overspend and can increase your risk of going into debt.

Always be responsible with your credit usage and carefully assess your spending habits and ability to pay on time before you apply for additional cards.

FAQs

What is the ideal number of credit cards for someone in their 20s?

At any age, it can be beneficial to have at least two credit cards from different networks to ensure broader acceptance and backup purposes. For example, having both a Visa and a Mastercard. Focus on cards that align with your spending habits and provide rewards or cashback. As you build more credit history, you might consider adding more cards as long as you can manage them responsibly and pay off the balances on time.

How many credit cards are too many for a student?

As a student, always be mindful of your financial habits and credit management before getting a credit card. It’s usually best to start with one card, preferably a student or low-limit card, to help you build credit and practice good financial habits.

What is the recommended number of credit cards to have in Canada?

There’s no specific recommended number of credit cards to have. Some people are perfectly happy not using a credit card at all. Some prefer to stick to a single card, and others are comfortable managing several credit cards simultaneously. The important thing is to manage your credit cards effectively by paying off balances on time, keeping your utilization low, and not acquiring excessive debt.