Deciding how many credit cards to have can give you a headache.
With new offers continually being presented to you, it’s tempting to want to take advantage of all of them.
But that would just be crazy, right?
Not for one person. In fact, Walter Cavanagh of Santa Clara, CA seems to have done something just like that. He holds the Guinness World Record for having the most extensive collection of credit cards.
Guess how many credit cards he has in his wallet?
He has $1.7 million in credit, and he keeps the cards in the world’s longest wallet (250 feet).
You don’t have to be like Walter Cavanagh to be successful with credit cards, though.
In this article, I’ll share some statistics on how many credit cards the average American has, how many you should have in certain situations, and some other things to consider before loading up your wallet with new plastic.
How many credit cards does the average American have?
According to the 2017 Experian State of Credit report, the average American has 3.1 credit cards.
It’s important to understand that because 3.1 credit cards is considered an average, it doesn’t mean it should be the benchmark for you. There are plenty of other factors to consider (primarily your overarching financial situation).
But, since you’re probably wondering how you stack rank against others (hey…we all do), Experian was courteous enough to give us this description:
“…here’s a picture of an average U.S. consumer today — let’s call her Jane Smith. Jane holds 3.1 credit cards and has an average balance of $6,354. She also holds 2.5 retail credit cards with an additional $1,841 in balances. Her mortgage balance is $201,811, and her other debt — mostly car loan debt — totals $24,706. Her credit score is 675.”
The part I find most fascinating about this is that, according to Experian’s data, Americans tend to fill their wallets up with retail credit cards over traditional credit cards (2.5 out of 3.1 cards are retail).
It makes sense, though. Retail cards are easier to come by and easier to get, but the big thing you need to be thinking about is how opening these credit cards impacts your credit score.
How are Americans using their credit cards?
What’s also interesting is how consumers are using their credit cards. According to Ellen Sirull of Experian, “…when it comes to paying with credit cards the most popular choice in the U.S. are cards with EMV chips (47 percent), followed by swiping a card (34 percent) and contactless cards, which are used on smartphones and watches (five percent).”
In addition, TransUnion (another one of the major three credit bureaus) had this to say about recent credit card usage in America:
“The number of credit card accounts rose 2.6 percent in the last year to 416.5 million in Q1 2018, up from 405.8 million in Q1 2017. In that same timeframe, the number of consumers with access to a credit card also increased by 2.1 percent to 174.9 million from 171.4 million one year ago.”
To go even deeper, they put together a really nice trend chart, showing how we’re using credit cards over the years (through the first quarter of 2018).a
And with the adoption of payment methods like Apple Pay, a growing part of the population may soon be without physical credit cards one day. Sirull states that
“…there will likely continue to be a growing number of options for consumers with the evolution of mobile wallets such as Google Pay and cryptocurrencies like Bitcoin still making the news.”
So, how many credit cards should I have?
It really depends on your specific situation. Here are a few scenarios that you might be in or run into at some point, and my recommended number of credit cards for each:
|Situation||# of Cards Recommended||Notes|
|Brand new to credit||1||Start with a single credit card that has a low credit line. This will not only build your credit but help you get used to using a credit card for the first time.|
|Rebuilding your credit||1||If you’ve experienced bankruptcy, charge-offs, or some other type of adverse credit event, I’d recommend you start with one secured credit card.|
|Small business owner||2-3||If you have a small business or even just a side hustle, I’d recommend having a credit card (business or not) that you can use solely for your business expenses. This will make things much easier at tax time.|
|Transferring balances||2-3||If you’re doing a balance transfer, I’m assuming you already have one credit card with a balance you want to pay off. You should have at least one other card that you can get an excellent balance transfer promotional rate on to move the balance too. Keep in mind, balance transfers are just promotions, so you need to have a plan in place to eliminate the debt altogether.|
|Everyday purchases||3||I think the average of 3.1 credit cards makes sense for someone who uses credit cards for everyday purchases and pays their balances off in full every month. Oddly enough, my current lineup is three cards as well. I use a Capital One Venture card for every single purchase I make (which gets me a ton of rewards), a Target RedCard for Target purchases (which, once you have kids just skyrockets), and a Chase United MileagePlus card for my business.|
|Rewards hacker||4-5||As long as you don’t open them all at once, I’d recommend between four and five credit cards to you if you’re seeking the best rewards and you’re okay with using multiple credit cards for different types of purchases. I’d include a cashback credit card, a travel rewards card, and a store card (like Target) to maximize your rewards wherever you shop. Remember - this is expert-level credit card hacking and should not be done by someone who can’t manage their debt and can’t pay their cards in full each month.|
The different types of rewards credit cards
When you’re trying to earn the most rewards, there are three kinds of credit cards you need.
1. Bonus rewards card
The first kind of credit card is used just for spending where you receive some sort of bonus rewards.
For example, the Chase Sapphire Preferred® Card offers 5X points on travel purchased through Chase Ultimate Rewards®, 3X points on dining, 2X points on all other travel purchases. So if you eat out often or have a lot of travel expenses, you’ll want to use your Chase Sapphire Preferred® Card only for those purchases.
You can tailor your card to where you spend most. Other cards can offer bonuses on gas, groceries, or office supplies. There are also cards that provide you bonuses at specific stores or travel spots.
Another important type of bonus spending is the sign-up bonus. If you’re looking to receive a sign-up bonus from a new credit card, you’ll also want to prioritize its use.
2. High ROI on everyday purchases
The second kind of rewards credit card you need is one that offers you a high rate of return on purchases that don’t qualify for a bonus.
Note that, if your preferred card for non-bonus spending is an American Express, you should also have a Visa or MasterCard to use where Amex is not accepted.
3. Personally important perks
Finally, there are credit cards that offer you some kind of valuable cardholder benefit. For example, many airline credit cards will provide you with perks such as a free checked bag or priority boarding.
Cards you keep versus cards that you carry
If you’re really into earning credit card rewards, you might have ten or more credit card accounts open. It wouldn’t make sense to bring all of those cards with you, all of the time. Not only would you have trouble fitting them all into your wallet, but you would also risk a massive headache if your wallet is lost or stolen.
You’ll want the following cards:
- An everyday spending card that you use for non-bonus spending.
- Bonus credit cards for your most frequent purchases
You don’t need to carry airline and hotel cards that you only keep for specific travel benefits. Instead, you can keep those cards at home, and bring them only when you’re traveling.
How many credit cards can you have before it hurts your credit?
If you screw up on one credit card, you can ruin your credit. That’s why there’s no way to answer this with a blanket response because every person has a unique credit profile. That said, there are a few things you need to consider:
New credit will lower your score
Every time you apply for a new credit card, it counts as a hard pull on your credit. According to myFICO:
“Research shows that opening several credit accounts in a short period of time represents a greater risk-especially for people who don’t have a long credit history. If you can avoid it, try not to open too many accounts too rapidly.”
New credit only accounts for 10 percent of your overall credit score, but these inquiries will stay on your credit report for 12 months. The key is to pace yourself on how quickly you open the accounts.
For example, if you’re going to apply for two new credit cards, do it within a short window of time, so the inquiries fall off your credit report around the same time.
The age of your credit history impacts it, too
The more credit cards you open, especially within a short window of time, the lower your average age of credit becomes. The length of your credit history accounts for 15 percent of your overall credit score, and it takes into account the average age of your open accounts.
Here’s an example
So, for simplicity, let’s say you had one credit card and nothing else on your credit report. If that credit card was opened five years ago, the length of credit history would be five years. If you opened another card two years ago, your average length of credit history would be 3.5 years (5 + 2 / 2).
As you can see, the more cards you open, and more rapidly you do it, the lower your length of credit history will be.
Balances, credit limits, and late payments mean the most
How you’re using each of the credit cards you have is probably the most important. Payment history and the total amount owed account for 35 and 30 percent of your overall credit score, respectively.
Whether you have 15 credit cards or one, if you have a late payment reporting on your credit report, it will impact your credit score. The same goes for balances. In most cases, it doesn’t matter if you have your debt spread across multiple cards or all on one—it’s still a reflection of what you owe, and your score will be impacted by that.
Credit utilization is very important
Also important is your credit utilization ratio. This is a ratio that shows how much of your available credit you’re using.
So, if you have a total of $50,000 in available credit across five credit cards and your total debt is $25,000, your utilization is 50 percent ($25,000 / $50,000 = .50). Generally, the lower your utilization ratio, the better.
How many credit cards should I have to improve my credit score?
All you need to build credit is one credit card. That being said, everyone’s situation is different. Credit cards can help you improve your credit score if done correctly. Here’s what you need to know:
Having a credit card is one of the quickest and easiest ways to build credit
It’s no secret that you need to show you can manage a debt account before you can really build credit. That’s why having a credit card can be great for building credit for the first time or improving your existing score.
With on-time payments and the age of your credit history increasing, your score will go up over time, and you can focus on maintaining that good score instead.
Is it bad to have a lot of credit cards with zero balance?
No. In fact, as long as you can manage your debt, it’s a good thing.
More credit cards = more credit = lower utilization (usually).
You’ll also have more available credit
Having more credit cards will give you more available credit, theoretically. If you open new cards and max them all out, this strategy is null and void. But, if you have multiple cards with zero balances, your available credit goes up, and your utilization ratio (how much debt you have versus your total credit available) goes down.
Never close a credit card
This is one reason I personally would never close a credit card account that I’m not using or one that has a zero balance.
This “extra credit” will help your credit score. As long as you’re not opening new cards like crazy (as I mentioned above), this could be a very effective strategy.
How much available credit should I have?
It really depends. When I worked as a credit analyst for a Fortune 500 bank, I’d see clients with upwards of $300,000 in available unsecured credit. These people had immaculate credit scores and rarely touched those credit lines, so it worked to their benefit. If you’re someone who struggles with debt, though, having $300,000 in available credit would be your worst nightmare.
Don’t get more credit if you already have debt
My advice is first to hold yourself accountable. Get a grip on the debt you have and pay that down. Once you’re able to pay off your credit card balances in full regularly, then I’d encourage you to seek more credit.
Ask for a credit line increase on your current card
Start first with asking for credit line increases on your existing cards – that’s the easiest and quickest way to increase your available credit. Then, over time, apply for a new card here and there where it makes sense.
Remember, utilization is just one small piece of the credit score pie, so don’t put your sole focus here.
So, how many cards is too many?
Some people will tell you that there’s no such thing as too many cards. This can be true to some extent. Each card you have open and in good standing will add to your credit history and increase your credit score over time.
Furthermore, every credit card you have includes a line of credit that will reduce your debt-to-credit ratio for a given amount of debt. And having a low debt-to-credit ratio will help your credit score.
If you have a spending problem, don’t have a lot of credit cards
Yet I would contend that it’s still possible to have too many credit cards. If having an additional credit card causes you to overspend or incur debt, then you have too many. If having multiple credit cards prevents you from managing your accounts responsibly, then you also have too many.
For example, some people with numerous credit cards might have trouble paying all of their bills on time or examining each statement for unauthorized charges.
Don’t have a lot of credit cards with annual fees
Finally, you can have too many credit cards if you’re incurring annual fees, but not receiving sufficient value. Many of the top reward credit cards have annual fees of $95 or more. Unless you’re earning enough rewards from each card to justify this payment, then you might as well cancel it.
As you can see, it really depends on two major factors when considering how many credit cards you should have:
- Do you have debt, and if so, is it under control?
- What are your spending habits, and do you have self-control?
Someone who has no debt, excellent credit, and pays all of their balances off in full every month could get away with a wallet full of credit cards, using them when it strategically makes sense. But someone who’s new to credit, has had a bankruptcy, or can’t reign in their spending might be better off with a single, secured credit card.
The key takeaway here is that whatever you decide, you have to hold yourself accountable. Nobody is going to hold your hand when you’re using your credit card.