How Many Credit Cards Should You Have?
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
If you ask the average American what they wish they had learned in high school, there’s a good chance they will mention credit cards. Building good credit is important for many of life’s milestones — like buying a house, a car, and taking out student loans. I’m fortunate because my parents helped coach me through my first student credit card, and it is still stuck with me more than a decade later.
Sure, there is plenty of information in the fine print of credit card offers and agreements. But unless you know what you’re looking for, it can feel meaningless. If you want to build your credit or expand your credit card rewards, you’re in the right place. Let’s talk about the impact of having multiple credit cards.
Jump To
What to know about holding multiple credit cards
In most cases, holding more than one credit card can work to your advantage. According to Equifax, “it’s generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit.” That being said, if you only have a single credit card or have more than two or three credit cards, you don’t necessarily need to focus on getting to that number. While the number of credit cards you have impacts your credit score, it doesn’t matter as much as how you use them.
The truth is that several factors impact your credit score. If you’re looking to build or maintain good credit, it’s important to become familiar with these factors. When you check your credit score with Experian, you will be able to see exactly how your usage is impacting your credit and what you can do to improve it. Here are some factors you’ll want to consider and how much they impact FICO Scores using the FICO Score 8 model. Keep in mind that while this can give you an idea of the most important factors, other models and types of credit scores may be different.
Use Experian To Get Your Free Credit Score
- Free Credit Score, Credit Report & Identity Protection
- Simple & Secure. Sign Up In Less Than 90 Seconds
Credit history length
The longer you hold credit accounts, the more reliable history you’ve built up. The average age of all of your credit accounts is considered, as well as the age of your oldest and newest accounts. This factor makes up 15% of a FICO Score.
Mix of credit
Equifax mentions in its recommendation that you should have other types of credit besides credit scores, which is being calculated here. Other types of credit can include mortgages, student loans, and auto loans. When you carry a diverse mix of credit types, it can show your ability to manage multiple types of credit and potentially improve your credit score. The mix of credit types and accounts makes up 10% of a FICO Score.
Inquiries and new accounts
When you apply for a new credit card or loan, the creditor or lender will inquire hard about your credit. They do this to review your credit report and decide whether your account can be approved and what terms you qualify for. If you have several hard inquiries within a year or two, it can indicate to lenders that you are a higher-risk person to lend to. The same goes for if you have opened several new accounts within a year or two. You can expect this to account for 10% of a FICO score.
Credit utilization ratio
Your credit utilization ratio represents the amount you owe compared to your total credit limit. To come up with this ratio (otherwise known as a credit utilization rate), the amount you owe is divided by your credit limit. The lower the rate is, the better it looks for you because it shows that you’re managing your debts responsibly and not overspending. Credit utilization has a big impact on your credit score, as it represents 30% of a FICO score.
Payment history
The factor with the most impact is your payment history. On-time payments show lenders and creditors that you are able to repay your debts on time. This shows that you pose a lower risk when applying for new credit cards or loans, and can help you get a better interest rate. You can’t be too careful with payment history — even a single missed payment can impact your score. Payment history accounts for 35% of a FICO score.
Types of credit cards
There are several types of credit cards to choose from. It can seem overwhelming, but once you know about the main types of credit cards, you can figure out which ones will work best for your situation. In some cases, it might be best to have a few different types of credit cards so you can use each of them strategically to get the most out of your credit card rewards.
Student credit cards
It’s hard to build credit when you don’t have a credit history. Student credit cards are specifically designed for young people (usually college students) with limited credit history. You can also think of it as a starter credit card. These cards typically have more lenient application requirements, and most don’t charge an annual fee. You may find that student credit cards have lower credit limits and more limited rewards. However, they are a good way to build credit so you can qualify for cards with better rewards in the future.
Related: Best Credit Cards for Students
Secured credit cards
Another option for those with limited credit or bad credit might be a secured credit card. Most credit cards are unsecured and do not require any collateral. Secured credit cards require cardholders to use a cash deposit as collateral. In exchange, they can receive a small line of credit that is usually around the same limit as the deposit amount. These credit cards are not ideal for the long-term, but they can be a good way to build or rebuild credit since they are the easiest type to get approved for.
Related: Best Secured Credit Cards
Cash-back credit cards
When it comes to rewards credit cards, cash-back cards are a popular choice. These credit cards allow you to earn cash back on your everyday purchases. Some cards offer a fixed amount for all purchases, while others may offer varying cash-back amounts for different categories. For example, a credit card might give you 3% cash back on purchases at gas stations, 2% cash back at grocery stores, and 1% cash back on all other purchases. Cash-back credit cards might also offer rotating rewards amounts, in which you might get 5% cash back on restaurant purchases in one quarter and then 5% cash back on gas station purchases in another quarter.
These credit cards could come with no annual fee or with an annual fee that the credit card company will set. There are a few ways to redeem the rewards. Most credit cards allow you to transfer your cash-back rewards for a statement credit to lower your credit card bill. You might also be able to use your rewards to get gift cards to major companies such as Amazon and Target. Or, you might be able to transfer the cash-back amount to your PayPal or another account.
Related: Best Cash Back Credit Cards
Travel rewards credit cards
Another popular option is travel rewards credit cards. These cards allow you to earn rewards that can be transferred toward travel expenses. Some credit card companies allow you to use the rewards to purchase travel through their travel portal. Others might allow you to transfer the rewards to specific airline or hotel rewards programs. When looking at travel rewards cards, it’s important to make sure you’re getting a card that will be useful for the places you usually travel. You wouldn’t want to earn rewards that can only be used for an airline that doesn’t serve any areas you travel to!
Travel credit cards can come with other perks as well. For example, some might offer credits for Global Entry or TSA PreCheck. They might also give you access to airport lounges to relax while waiting to board a flight. These cards can come with a more expensive annual fee, but some travel rewards cards have a low or no fee.
Related: Best Travel Rewards Credit Cards
Store credit cards
If you’ve ever purchased something in-store, there’s a good chance you’ve been asked whether you want to apply for a store credit card. These credit cards can be a good option if you do a lot of shopping at a specific store. With most store credit cards, you’ll earn a higher rewards rate for shopping at that store or family of stores. Some store credit cards might also allow you to earn points on purchases anywhere that can be redeemed for store credits.
Business credit cards
Some credit cards are designed specifically for businesses as well. They’re a good option if you run your own business. You might also receive a business credit card from your employer that you can use to purchase for the company.
Business credit cards can come with a variety of benefits. Some allow you to earn cash-back rewards redeemed as statement credits or gift cards. Others might be travel-specific business credit cards to help you pay for your business travel expenses.
Related: Best Business Cards
Use Experian To Get Your Free Credit Score
- Free Credit Score, Credit Report & Identity Protection
- Simple & Secure. Sign Up In Less Than 90 Seconds
Top credit card companies
One of the most intimidating things about credit cards is choosing the right one for your financial goals. Some people might only look at the credit card individually, while others might consider the servicer of the credit card as well. Here are just a few of the most common credit card companies.
Capital One
Capital One is one of the major banks in the United States. The company came about in the 1990s intending to revolutionize the banking industry. Capital One offers a variety of credit cards, including secured credit cards, student credit cards, business credit cards, travel rewards cards, and cash-back rewards cards. Some cards even have additional benefits, such as a 0% introductory APR and/or no annual fee. If you have a store credit card, you might also find that your card is serviced through Capital One as part of a partnership.
Chase Bank
Chase Bank offers a variety of financial products. In addition to credit cards, it also offers mortgages, auto financing, small business loans, and other business services. You can use Chase Bank for your personal banking account as well to keep everything in the same place. Whether you’re looking for a business or personal credit card, there are plenty of options to choose from. Chase Bank even offers a guided questionnaire to help find the credit cards that best meet your needs.
Citi
Like its competitors, Citi has a lot to offer. You can get credit cards designed for airline rewards or cash-back rewards. Citi also offers specific cards for Costco members, cards with low-interest rates, and sign-up bonuses. In addition to credit cards, Citi offers business banking, loans, and wealth management services.
Synchrony Bank
Synchrony Bank is an online bank allowing its customers to do their banking business without stepping into a physical bank. Its credit cards are known for having a flat cashback rate with no limits on how much you can earn. Synchrony Bank services many store credit cards and offers Synchrony Bank branded cards. The bank also offers high-yield savings accounts, money markets, and more.
Related: Synchrony Bank Online Bank Review
Fees associated with credit cards
When looking at credit cards, you should consider the fees associated with each card. Every card is different, and some have more fees than others. These are some of the fees you’ll want to keep in mind.
Annual fees
Some credit cards charge an annual fee, essentially just a fee for keeping lines of credit open. As an introductory offer, some credit cards may waive the annual fee for the first year but charge the annual fee every year thereafter. Other cards don’t charge an annual fee at all.
Interest fees
One of the main things to consider when looking at credit cards is the interest fee. You can find this referred to as the annual percentage rate (APR) on your credit card paperwork. Interest fees can either be fixed to stay the same for the card's lifetime, or they could be variable and subject to change.
The good news is that there is a way to avoid paying interest fees. Credit cards only charge interest on credit card balances left over after due dates. Usually, the minimum payments for each billing cycle will leave some credit card debt behind. But you won't be charged interest if your monthly payments are equal to the credit card’s statement balance and paid by the due date.
Balance transfer fees
Balance transfers are when you transfer debt from one credit card to another. It’s not uncommon for people to submit a credit card application with this goal, especially since some credit cards offer a 0% balance transfer fee for a limited time. Balance transfer fees are typically equal to a percentage of the debt you are transferring, with 5% being the highest fee you’ll see from most cards.
Related: Best Balance Transfer Cards
Late payment fees
If your monthly payments are not made by their due dates, you might see a late payment fee on your next credit card statement. This fee is automatically added to your account if you don’t pay at least your minimum payment by the due date. The late payment fees can vary by credit card, and you can see what those fees are when reviewing credit card offers.
Foreign transaction fee
Foreign transaction fees are charged for purchases made outside of the country. If you travel outside the United States often, the foreign transaction fee can be a huge deciding factor. The foreign transaction fee is usually a small percentage of the purchase amount. Some credit cards — particularly those that are designed for travelers — don’t charge any foreign transaction fees at all.
Use Experian To Get Your Free Credit Score
- Free Credit Score, Credit Report & Identity Protection
- Simple & Secure. Sign Up In Less Than 90 Seconds
Pros and cons of having multiple credit cards
Pros
- Holding multiple credit cards gives you a higher credit limit overall.
- You can have credit cards with different types of rewards, which allows you to have more control over what rewards you receive.
- If you manage multiple credit cards well, it can increase your credit score.
Cons
- The increase in available credit that comes from holding more than one credit card can lead to poor spending habits, which can hurt your credit score.
- When you have multiple credit cards, you’ll have multiple due dates and payments to keep track of.
- Each time you submit a credit card application, you can expect the creditor to perform a hard inquiry on your credit. This will appear on your credit report and can be a negative factor if you apply for credit cards frequently.
The bottom line
Credit cards can be a wonderful tool to build credit and earn rewards. However, they need to be carefully managed. It might sound intimidating, but it mustn’t be that difficult. As we learn, it’s natural to make mistakes. So if you miss a payment at some point, take it as a learning opportunity and pay as soon as possible.
I wouldn’t recommend applying for multiple credit cards at a time, but holding more than one card is beneficial in most cases. Understanding the fees that come with credit cards and how credit cards can impact your credit is a huge advantage. As long as you’re being deliberate with your credit card applications and usage, managing your credit card debt can be fairly easy. Remember, while you can review the best credit cards overall and use that to decide which card(s) you want to apply for, you should always keep your financial goals in mind and act accordingly.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Writer
Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
Share this article
