Unfortunately, there is no simple answer to the question, “How many credit cards is too many?”
The answer depends on your financial situation and how you manage your spending.
We all know the temptations of more credit cards. They seemingly offer endless opportunities to buy whatever your heart desires: yet another pair of Air Force 1’s, a sweet new Bluetooth speaker, a delicious $8 breakfast smoothie, etc.
Once the monthly statement comes along, it's pretty common to feel regret. Especially if you’ve let a few nights out with friends get away from you.
However, just because credit cards may tempt you to spend irresponsibly does NOT necessarily mean you must avoid having multiple of them at all costs.
On that note, let’s take a close look at the pros and cons of adding another credit card to your wallet. We promise to keep it simple:
Pros of Having Multiple Credit Cards
Why would one want to juggle having multiple credit cards? Let’s run through some common reasoning.
Rewards to Earn
Credit card companies LOVE giving rewards to people who sign up for their services.
These rewards fall into so many different categories that picking the best one can feel like trying to find a movie among the seemingly endless options on Netflix.
Popular examples of credit card words programs include:
- Cash Back Rewards
- Travel Rewards
- Grocery Rewards
- Dining Rewards
- Gas Rewards
- Airline Rewards
While rewards of any kind are definitely enticing, it isn’t worth opening more credit cards than you handle.
Lower Credit Utilization Ratio
In simple terms, your credit utilization ratio is the amount of revolving credit you use divided by the amount you have available. Many credit experts recommend keeping your credit utilization ratio below 30%.
For example, if your sole credit card has a credit limit of $3,000, and you rack up $2,700/month in purchases, your credit utilization ratio on that card is very high – 90%.
Even if you pay the monthly balance on time, a high ratio will inevitably hurt your credit score.
However, If you sign up for another credit card and use it to spread out your payments, it may be easier to keep your credit utilization rate lower on each card, boosting your credit score.
“Just in Case” Cards
Many of us have lost a credit card or had one stolen. It can be a miserable experience that ruins a day or, even worse, a special occasion, trip, etc.
Some financial advisors recommend having two credit cards for precisely these situations.
Credit card companies sometimes take days to send you replacement cards, leaving you to make purchases with your debit card or even less reliable payment methods.
If you like the mindset of “better safe than sorry,” this might be a reason to get a second credit card if you only have one.
Cons of Having Multiple Credit Cards
The initial freedom of a credit card feels pretty euphoric, but if you get carried away, you can fall into dangerous territory.
This is an obvious one. The more credit cards you have, the more money you have (or think you have) to spend.
However, as we all know, every penny spent on a card must be paid back at some point – possibly with interest if you struggle to pay off your balance(s) at the end of the month.
Before adding a second or third credit card to your wallet, it’s a good idea to take an honest look at your spending habits.
If you don’t trust yourself to be responsible with the added spending power of another credit card, it might be best to stick with what you have for the time being.
Multiple Repayments to Manage
You'll have to make multiple monthly payments to keep your balances down if you borrow money on two, three, four, etc., credit cards.
Unfortunately, this is much more complicated than fulfilling backlogged Venmo requests, buying your friend the next round, or a simple “I owe you one.”
Many credit cards offer autopay options that automatically make your payment once your statement is posted. This option is great if your memory isn’t so hot; it takes the necessary money from your checking or savings account without you having to lift a finger.
However, this option only works if you can consistently, confidently guarantee that your account(s) will have the funds necessary to make each credit card payment.
If you cannot ensure this, you might want to think twice about adding to the number of credit cards in your wallet.
Negative Impacts on Your Credit Score
You already know that a solid credit score is essential to your financial well-being. It’s something worth passionately protecting – like an excellent parking spot, a fresh pair of sneakers, or your place in line for the bathroom at a concert.
So, does applying for a credit card hurt my credit score?
The answer, as you might guess, can be complicated:
Like we mentioned earlier, getting an additional credit card can sometimes heighten your credit score by reducing your total credit utilization ratio.
However, applying for too many credit cards at once can dramatically lower your credit score. This happens because other people try to bend the rules by signing up for lots of credit cards, enjoying “sign-up bonuses,” and then canceling after they reach the required spending amount.
To no one’s surprise, card issuers don’t like this practice and go to great lengths to prevent it.
Even if you follow the rules and pay on time consistently, signing up for additional credit cards can also make you seem like a risk to lenders. Picture the person who’s had a few-too-many drinks at the bar getting cut off by the bartender or temporarily banned from the establishment.
Pros of EXTRA
Instead of mindlessly signing up for another credit card, why not check out EXTRA, the first debit card that helps you build credit?