How many credit cards should you have? Experts say it depends

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Credit cards often get a bad rap because they have high interest rates and lead to unmanageable debt. But they are also a necessary financial tool and can be a huge asset, if managed responsibly.

Having a credit card can give you some financial leeway when you’re dealing with emergency expenses or when a purchase doesn’t quite fit your monthly budget. It can also help you establish a positive credit history and provide a safe and secure alternative to other payment methods.

How many credit cards does the average person have?

According to last digits from Experian, the average American has 3.84 credit cards with an average credit limit of $30,365. And their credit journey typically starts early, with the average Gen Z consumer having 2.1 credit cards.

Your credit card habits are a big part of the makeup of your credit score, how many cards you apply for, your balances, your payment history, and more. Being selective about what cards you have and how many of them is essential to maintaining a healthy score.

How many credit cards is too much?

So how many credit cards should you have? And how much is too much? According to experts, the answer is: it depends.

How many credit cards you should have ultimately depends on your personal needs and spending habits. “Some consumers only use one card so they can build a credit history, but other consumers may want multiple different cards for personal, business, travel, airline status, etc.” , says John Cabell, managing director of Payments Intelligence at JD Power.

As for “too many” credit cards, you’ll want to limit the number of credit cards you have to the number you can reasonably track and afford to repay each month. Credit cards are only a valuable asset insofar as you can make payments on time and avoid carrying a balance from month to month. If you are unable to do this, you could find yourself weighed down by unmanageable debts, interest and fees.

On the other hand, if you can track your payment due dates and control your spending, you could see an increase in your credit score over time.

How Credit Cards Affect Your Credit Scores

Your credit cards directly impact your credit score in different ways. Here’s an overview of the various factors that go into the overall makeup of your FICO score, the most widely used credit scoring model.

  1. Payment history: Issuers like to see that you have a history of paying your debts on time.
  2. Amounts due: This is the sum of your overall balances. When it comes to credit cards, your credit utilization rate tells issuers how much you owe compared to available credit. Most experts suggest spending no more than 30% of your available credit.
  3. Length of credit history: Having a long track record of responsible credit management shows issuers that you can be trusted with new credit.
  4. Composition of credit: A good mix of different credit products tells issuers that you can handle new credit responsibly.
  5. New credit: The number of new credit accounts you have recently opened.

Each time you apply for a new credit card, the financial institution pulls your credit report to determine whether to approve your application. This is called a difficult investigation. “Too many cards can hurt your credit score, because the ‘rigorous’ credit check for each card application can lower your score at least temporarily,” says Cabell.

If you are approved, a new credit card can positively impact your credit mix and credit utilization ratio by introducing a new type of credit to your wallet and increasing your available credit. However, it can also hurt your score if it’s a string of recent credit applications or if you don’t make any payments on time.

When it makes sense to have more than one card

There are instances where having multiple credit cards can be beneficial. Rewards credit cards, for example, can help you cut costs if you use a card that rewards you for purchases you already intended to make.

“Using a card that offers cash back on in-store and restaurant purchases, and a card affiliated with a gas station retailer for the purchase of fuel can be a smart way to maximize the value of the map,” says Cabell.

Some consumers might also prefer to have at least two credit cards so that they can use one for day-to-day expenses and use the other to finance major purchases. Before signing up for additional credit cards, you should first take a close look at your spending habits to see if you can spot any trends.

If you go to the grocery store frequently, fill up every day, or visit a certain retail store often, you might consider a credit card that will reward those expenses and help you save in the long run.

Once you’ve decided which cards are best for you, you’ll want to set yourself up for success by setting up automatic payments and regularly monitoring your spending and credit score. You can even choose your credit card payment date to match the same day your paycheck arrives in your bank account.

“The most important thing is to make sure you pay at least your minimum payment on time,” says Autumn Lax, CFP and accredited investment trustee at Drucker Wealth. “From there, be mindful of your interest rate, focusing on paying off higher interest cards or completely.”

When to wait to get a new credit card

Managing multiple cards isn’t for everyone. This can cause you to spend more than you can afford and lower your credit score. It’s essential to know what type of consumer you are and to be realistic about your ability to handle multiple cards.

You may want to wait before applying for a new credit card if:

  1. You struggle with debt management: Having access to even more credit could add to your growing debt balance. Know when to say when and avoid asking for a new card if you’re already struggling to manage the ones you have.
  2. You have too many recent hard requests: Every time you apply for a new credit card or other type of financing, a serious request will be registered on your credit report. Applying for too many lines of credit in a short time can seriously hurt your credit score and scare off lenders from doing business with you.
  3. You plan to apply for funding soon: A clean credit report and a high credit score are essential to obtaining financing for a new home, a new car or a new business. If you plan to apply for a loan soon, consider delaying any new credit card applications until you have secured the financing you need.

Before adding a new card to your wallet, make sure it will work for and not against your financial goals and budget. “A credit card can allow you to increase your purchasing power by buying things and paying for them when you have money,” says Cabell. At least as long as you are working within your overall disposable income.

EDITORIAL DISCLOSURE: Any advice, opinions, or rankings contained in this article are solely those of Fortune Recommends editorial team. This content has not been reviewed or endorsed by any of our affiliate partners or other third parties.

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