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Is your wallet as skinny as your jeans or bursting at the seams?
There’s no correct answer when it comes to how many credit cards a person should have. In 2020, the average American held just under four credit cards, according to Experian, one of the three major U.S. credit bureaus. But a person’s age, financial situation and long-term goals can all play into what makes the appropriate number of credit cards to have.
Is One Credit Card Enough?
Credit cards offer convenience when making purchases online or buying expensive items like a media room or a fully equipped garage. Many credit cards also offer benefits like travel rewards or cash back bonuses that serve as an incentive to use the card for purchases. You don’t need multiple cards to reap these benefits if you find one that fits your needs.
Having a single credit card can work well for anyone who wants to start building credit, including college students or new citizens, or for someone who doesn’t want to keep track of rewards balances on multiple cards and has the ability and need to put thousands or tens of thousands of dollars on a card each month. A credit card that offers cash back for everyday purchases like gas or groceries is a good starting point, but it’s not enough if you want or need more elaborate perks or benefits, like luxury airport lounge access or a concierge service.
Related: The Best Credit Cards of 2021
What’s the Right Number of Credit Cards?
How many credit cards you should own depends on whether you can benefit from cards with different rewards options—while also managing your finances responsibly.
Two to five cards in anyone’s wallet is usually enough to cover the bases. Cardholders should strategize by applying for cards offering different benefits. This way the cardholder can maximize savings potential.
Consider a strategy in which you hold:
- One card that offers bonus rewards on travel
- One for dining
- One that offers a high cash-back rate for all other purchases
Of course, the correct combination of cards depends on your spending habits, money-saving goals and financial situation.
Besides taking advantage of different rewards or welcome bonuses—which offer you a one-time cash-back or points rebate after you spend a required amount of money within several months of opening the card—having more than one card provides another particularly strong benefit: It can help you boost your credit score.
Here’s how. The FICO score, which is the most widely used credit score, takes into account how much of your available credit you use when determining your score. That’s why it’s a good idea to keep your so-called credit utilization low, both overall and on individual cards.
FICO recommends you keep your credit utilization rate (how much of the credit line is being used divided by the total amount available) under 30%. The larger the credit line, the less likely a cardholder will surpass 30%. The key is to pay off your balance in full and on time every month to avoid racking up interest and falling into debt.
How Many Credit Cards Is Too Many?
When deciding which credit cards to apply for (and how many), it’s important to think about how easy it will be to keep up with monthly payments. If you are prone to forgetting to make bill payments on time or if you simply can’t afford more than one monthly payment, having multiple credit cards may be a bad idea.
Paying off all card balances every month remains the key to maintaining a good credit score (payment history is 35% of the FICO score formula), avoiding high interest fees or falling into a cycle of debt. Annual fees also add up and aren’t worth paying if the card isn’t offering you a big enough benefit to counterbalance the charge. What’s more, the more cards you have, the less likely you are to fully utilize all of the benefits from all of the cards.
Deciding how many cards to own—and figuring out the best cards to apply for—depends entirely on your spending habits, long-term goals, rewards potential and even age. When trying to build credit for the first time, start off with one credit card to get used to paying a bill every month and receive basic rewards. A credit card that offers cash back for everyday purchases is usually a good place to start.
When you’re ready to move on, consider upgrading to a card with bigger benefits, but remember not to apply for too many within a 12- to 24-month period as this may lower your credit score and send a warning sign to other potential lenders.
Chauncey Crail’s work covering film, art, travel, personal finance, health, automotive, aviation, home improvement, small business and other subjects has been published by a variety of media outlets, including Forbes Advisor, Investopedia, Rolling Stone and Robb Report, among other publications.