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How many credit cards should I have?

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Do you have enough information about credit cards? Are you willing to add some more cards to your financial health? Without complete guidance, there will always some questions that bother you and make you confused. Moreover, the incomplete information of credit cards will not help you to manage your financial activities. So, it is advisable to form a solid foundation of financial management before making any move.

There is no specific rule of holding bank cards in your pocket whether it is a credit or debit card. Besides, the number of credit cards would expand your credit limit but also affect your credit score. It also impacts your ability to secure some crucial things such as home loans or personal loans. Before digging into the number of credit cards one should hold, let’s have a brief introduction of what do you understand by a credit card.

What is a credit card?

what is a credit card 1

More than a rectangular piece of plastic or metal, a credit card allows the cardholder to borrow funds and pay money for goods or any services where it is accepted. It is issued by a bank or financial services company under certain terms and conditions. After swapping the card for any particular activity, you have to pay back the borrowed money with applicable interest. Some wonderful features of this card are:

  • No need to check your saving account before buying anything
  • Act as a financial backup for crucial situations
  • Available with monthly bills that lower the stress of paying the complete amount at once
  • Provides different schemes in terms of reward points or cashback
  • No connection with saving accounts, so no fear of losing saved money

How many credit cards are too many for some people?

how many credit cards are too many for some people 1
how many credit cards are too many for some people

As discussed earlier, there is no specific limit to carrying credit cards. For some, one card is more than enough whereas some are always willing to add a new card to their list for more financial activities. For getting the right answer to this question, one should know that the number of cards influences your credit scores as well as finances.

Instead of holding several cards, more important is how you use these cards. This is because the ultimate thing to keep in mind is your credit score, which responsible for opening or closing bank accounts or loan proposals. Furthermore, your payment history and credit utilization rate say a lot about your credit scores. Having numerous credit cards may help to lower your utilization rate. If you are an active cardholder and paying your monthly balance timely, that means you are putting positive information into your payment history.

how the number of credit cards affect your credit score
how the number of credit cards affect your credit score

How the number of credit cards affects your credit score?

There is no direct connection between the number of cards and credit score but your activities can do so. Holding more than one card may complicate your life and you would not available for timely payment that could hurt your score. So, be wise when you are going to buy more cards in order to amplify your financial progress. For keeping more cards, you have to open more accounts that will affect the following factors:

Credit utilization rate:

About 1/3 of your overall credit score is decided by your credit utilization rate. Matter of fact that opening a new card lowers your utilization rate and benefits your credit score but it demands a hard credit inquiry. It may delete few points from your score temporarily.

Payment history:

People who have a FICO score of more 795 or higher come under the category of excellent credit. And, about 65% of the FICO score depends on your payment history and card utilization. In other words, you can say that your payment is far more important than holding numerous cards. 

Credit age

Age always whether it comes to professional or personal decisions. In the financial world, credit age matters when it comes to owning a credit card. Your credit score sums up the average age of all your cards. It means you have enough reasons to close a card if it is not worthy. 

Disadvantages of several credit cards

Now, you have understood how many cards you can hold to give a bounce to your financial growth. As a suggestion, go through the following key points before adding another card to your pocket:

  • Holding multiple cards tense you to track your spending. If you fail to pay your monthly bill of any card because of any reason, you will face unnecessary interest and put a bad impact on your score.
  • It may also entice you to spend more than your budget or affordability. It may not matter for some wealthy people but for some, overspending is a big issue.
  • Many credit cards application in a short period require intense and multiple inquiries. It will negatively impact your credit scores.

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