How many credit cards should you have?

According to Experian's State of Credit survey, the average American carries 6 credit cards in their wallet. You might wonder, is this too many, and how many credit cards should I have?  

It all depends on your credit history and your personal financial needs. So, instead of focusing on how many open card accounts you should have (or may think you need), consider what impact your current cards have on your overall credit score, and whether or not those cards are helping you reach your financial goals.  

How do I know if I have too many credit cards? 

Certain situations may indicate you’re juggling more than you can manage:  

You spend over your monthly budget. 

If you have a hard time sticking to a budget and have several credit cards with high limits, you could wind up overspending your way into debt. 

You struggle to make payments on time. 

If you’re habitually late paying your bills—or worse, if you miss payments altogether—you may be managing too many cards. Missing payments doesn’t only trigger late fees; your credit score can take a nosedive, too.  

You are declined for new card offers. 

If you’re having trouble paying what you currently owe and you have too many inquiries on your credit report, this signals to lenders that you might be seeking more credit than you can handle. Before you apply for a new card, ask yourself if you truly need it. If you’re seeking out more credit because you’ve reached your credit limit on other cards, maybe it's time to consider a debt consolidation loan instead. 

Your financial goals can help determine what's right for you 

Below are some examples of financial goals, and whether or not a credit card can help you meet them: 

You’re building your credit history and score. 

If you're just starting out and your credit history is still new, or if you’re trying to repair your credit, you may want to consider a secured card. With secured cards, you pay a cash deposit upfront that serves as collateral for the card issuer in the event you are unable to make your payment. Your cash deposit is typically equal to your credit limit. Your payment history will be reported to all three credit bureaus, so keeping up with your payments can help improve your credit score. 

You're maximizing rewards earnings. 

Rewards programs can vary greatly between credit card providers. While one card may offer great cash back, another may help you quickly rack up travel points. That’s why some people choose to have multiple cards they use in tandem to maximize reward benefits. However, earning rewards isn’t as important as having a healthy credit score. It's always a better idea to apply for credit only when you need it and are able to manage it. 

You're buying a new house or car. 

If you’re planning on making a big financial move such as buying a home, recent credit card applications (and the ensuing credit inquiries from card issuers) can backfire. Each new credit application triggers a hard inquiry, temporarily lowering your credit score. The Consumer Financial Protection Bureau recommends avoiding any new credit applications in the months leading up to securing a new mortgage, refinancing, or taking out a substantial loan of any size. 

If you want the most favorable interest rates and terms on a new mortgage or auto loan, your best bet is to use your existing credit cards to improve your overall credit score. This means paying your bills on time and keeping your balances and credit utilization as low as possible. 

You're managing a large amount of debt. 

While it might seem easy to apply for another new credit card to expand your available credit if you already have a large amount of debt that you don't foresee paying off within a couple of months, there are better, smarter options. Before filling out another credit card application online, consider instead setting yourself up on a budget and taking back control by consolidating your debt with a balance transfer personal loan. 

What should I do if I think I have too many cards? 

Having multiple open credit card accounts won't impact your credit score. In fact, keeping older cards you're not using open can increase your average credit history length and credit utilization ratio. As long as the card doesn’t carry an annual fee or other charges, think twice before closing the account.  

Of course, if keeping a card open that you're no longer using creates too much temptation to overspend, you can try cutting it up, or putting it under lock and key. While closing your account with the credit card issuer is always an option, it will most likely impact your credit score temporarily.  

If you’re struggling to manage your credit card debt and need help getting back on track, consider a debt consolidation loan. A debt consolidation loan is a form of debt refinancing that combines multiple balances from credit cards and other high-interest loans into a single loan with a fixed rate and term. Debt consolidation can help you pay down debt faster, save you money by reducing your interest rate, and even improve your credit score by diversifying your credit mix and reducing your total debt (as long as you’re not adding any new debt). 

3 Ways credit cards affect your credit score 

How you use the credit cards in your possession matters, especially when it comes to building and maintaining a good credit history and credit score. Here are important ways credit card use (or misuse) can affect your score: 

1. Payment history 

Payment history has the most significant impact on your credit—making up 35% of your FICO score. Your payment history—the official record of how you’ve historically repaid money owed—shows potential lenders how reliable you might be as a potential borrower.  

The best way to maintain a positive payment history is by paying your bills on time, all the time. Missing a due date can deliver a big blow to your credit score. If you're already struggling to keep up with multiple credit card payments, setting up automatic payments and bill reminders can help you keep track of what's due and when. Before you apply for a new card, be sure you can make the payment on time so you don't become overextended or overwhelmed beyond your capacity to repay. In fact, first consider whether you should be consolidating some or all of that credit card debt instead.  

2. Credit utilization 

Credit utilization is the amount of credit you’ve used compared with the total amount that has been extended to you by all your lenders combined. To maintain a healthy credit score, experts recommend keeping your total credit utilization ratio at or below 30% across all of your accounts. While some people spread monthly purchases across multiple cards to keep their utilization low, that same strategy may also tempt you to overspend and max out all of your cards. 

When you max out (i.e., reach your credit limit and have no more credit to use) even just one of your cards, it can hurt. If you don't act quickly to lower your credit balance, keeping a high balance may cause your scores to plummet, your minimum payment to increase, and any potential new transactions to be declined. 

3. Credit history 

The average age of your open credit accounts is important because it shows lenders how long you’ve been managing credit. The longer your credit history, the better for your credit score. That’s why it’s a good idea to keep old accounts open and in good standing in order to maintain excellent credit, even if you’re no longer using those cards. 

If you have an unused credit card that you want to keep open, consider making a small purchase at least once a year and paying it off immediately. Doing this can help prevent your credit card issuer from closing your account due to inactivity. 

The bottom line 

When it comes to applying for credit cards, consider your financial goals, not a specific number (or perks offered by credit card companies). If a new credit card won’t help you reach those goals—or worse, sets you back—be careful. If you’re carrying credit card debt, consider all of your options to help you manage.  

Credit card FAQs 

How many credit cards should I have to improve my credit score? 

There is no magic number of credit cards to hold in your wallet that will boost your credit score. Instead, focus on applying only for what you need, making payments on time, and keeping your card balances low. If it's possible, get to the point of paying your balances down in full every month if you can.  

Does having multiple credit cards hurt my credit score? 

If you stay on top of your monthly payments and keep your total credit utilization under 30%, you may be able to manage multiple credit cards without harming your credit. However, as a general rule, most experts recommend only applying for the credit you need.  

Should I open another card to increase my score? 

Your credit score is determined by several factors such as your credit utilization, credit mix, and payment history. By opening another card you may lower your credit utilization and improve your credit mix, but it depends on your personal financial situation. Keep in mind that opening a new card may lower your score temporarily. If you’re struggling with your credit or trying to improve a low credit score, it’s better to focus on properly managing the cards you already have.  

Should I get another credit card or personal loan? 

Whether to apply for a new credit card or a personal loan depends on how you plan on using the line of credit or money borrowed, and how long it will take you to repay. If you want to use credit to make everyday purchases and earn rewards, having access to a revolving line of credit (i.e., a credit card) can be a good option. On the other hand, a personal loan is often a better choice if you want to finance a large, major purchase or need a longer period of time to pay down accumulated debt. Either way, shop around to find the credit option that best matches your financial goals.  

Will closing a credit card hurt my credit score? 

Sometimes closing a credit card can raise your credit utilization rate and reduce your average credit age and number of accounts, all of which can negatively affect your score. After taking in to consideration any annual fees you may be paying, in some cases it may be better to keep older, unused credit card accounts open.