Whether you’re just starting to build your credit history or you’ve had credit for decades, understanding the right amount of credit cards to have can be confusing. With credit card companies constantly advertising new account bonuses and pre-approval mailers, getting a new credit card can be tempting. In this article, we’ve found advice from Reddit to help you decide how much credit you should ideally have.
The pros of having multiple credit cards
Certain credit cards are tailored to having better rewards for certain purchases
One large advantage of having credit cards are the cash back rewards and travel miles you can earn from spending on them. Lots of people use specific cards for specific reasons. In the Reddit post below, the user explains the specific uses of the cards they own.
“I have many credit cards to my name but keep 9 in regular rotation for cash back purposes:
- Citi Double Cash: 2% cash back
- Verizon Visa: 4% groceries and gas
- Bank of America Visa & MasterCard: 3.3% online purchases (3% + 10% bonus for depositing into a BoA account. Each with $2500 quarterly limit on boosted rewards)
- Capital One Savor: 3% restaurants
- Amazon Visa: 5% at Amazon
- Target Red Card: 5% at Target
- Delta AmEx: Free check bag + marginal perks
I prefer cash back to miles, so I’ve developed my system based on that. I also prefer to keep cards with no annual fee, so that I’m not bound to commit to a certain usage % in order to make that card worth my while.
Over the past few years, I’ve opened cards primarily for the welcome bonuses, but I’ve slowed down on that since 2 years (partially because those deals have become more scarce).
My FICO right now is 786 and has fluctuated +- 20 pts over the past few years. Anything 740+ makes you a prime lendee and it doesn't bother me as long as I have a 20 pt cushion from the 740 floor.”
More cards can help lower your credit utilization
The Reddit post quoted below, explains how more credit cards can help lower your credit utilization and potentially increase your credit score.
“There's a lot of good information in these comments, and I want to hop in to clarify a couple of things. The majority of places that care about your credit score tend to use the FICO scoring model.
35% of the FICO score is comprised of your payment history - not how long your payment history is, but how consistently you pay on time.
30% of your score is your utilization rate - the ratio of how much you owe to how much credit you have (under 10% utilization is ideal, but under 30% is still considered good).
Only 15% of your score is based on your length of credit history. Also, closed accounts remain on your account for 10 years, and will still contribute to your credit history length.
I know you didn't ask specifically about all of that, but I thought it might be useful when weighing your options with different credit cards.
Basically, having more credit cards doesn't hurt your score. It will increase your credit limit, which will help bring down your credit utilization (assuming you still spend the same as before). It could potentially also help you down the road with the average age of your accounts in certain circumstances.”
The cons of multiple credit cards
Credit checks impact your credit score
When you apply for a new credit card, the lender inquires about your credit report which lowers your score. This comment explains.
“Each time you apply, it will run a hard inquiry on your credit report which will lower it by maybe 5 points (many companies, such as American Express, will only do a hard enquiry on your first credit card with them. Subsequent cards are all internal and "soft pulls" which don't affect your credit).
10% of your FICO score is based on "New Inquiries". Meaning that applying for a bunch of new cards all within a 24 month period will also lower your score and prevent you from getting new cards (looking at Chase with their 5/24 rule). One or two cards in that timeframe likely won't drop your score. It's only when you start getting up to 6, 7, or more cards.”
With access to more credit, you may be tempted to spend more. This comment says it well.
“More credit can easily become a vice if you start spending outside your means.”
So, how many does Reddit suggest you have?
The most common recommendation from Reddit is to have cards for three purposes: primary, backup, and an emergency card. The comment below explains this reasoning well.
“Getting more credit cards is not how you build your credit score super fast. The big way to build your credit score is nothing more than time with a good payment history.
More credit cards can in theory help you by lowering your utilizations by more limit but there are dimensioning returns fast. Plus if you have a lot of available credit can cause some places to run from you but that is not score based.
As a general rule I believe in 3 credit cards. Primary, backup and then one do carry. That last one is for just in case you lose your wallet you still have access to money while everything else is getting replaced. After that point your score is not helped and more you are looking at using the credit cards for their rewards.
I have a credit score north of 780. The only reason I have more than 3 credit cards is for reward purposes and because I am married my wife is the emergency backup card carrier as we do not have total overlap but beyond that I used to only carry 2 cards. A primary good cash back card (Amex) and backup card which was my Amazon Visa. My emergency backup was just another non rewards visa that I just kept in a desk drawer when I was single just in case I lost my wallet which yes I have had to use for a few days while my other cards were getting replaced.”
The bottom line
How many credit cards you have is dependent on your specific circumstances. Having cards specifically for spending, automatic payments, and emergencies are a good idea. Finding the cards with the best rewards for your lifestyle can help you simultaneously earn money back and grow your credit score.
If you have credit cards and are interested in reducing your APR to 12% while keeping your current cards, earning rewards for paying card bills, and no fees, be sure to check out Gauss.