How Many Credit Cards Should I Have?

How many credit cards you should have? There is no one-size-fits-all number for how many cards you should have. Americans, on average, own 3.4 credit cards—but that number could be lower or higher for you, depending on your needs.

Two credit cards is a good number to start with: You’ll likely need at least this many to keep your credit scores high, and it’s always smart to have a backup card in addition to the primary one you use. Try to make sure your cards come from different credit card networks (American Express, Discover, Mastercard or Visa) in case a merchant you shop at does not accept all of them.

Owning fewer cards can help you stay out of debt if you’re prone to spending and not paying off your balance. But adding a few extra cards to your wallet can help you reap rewards and could even improve your credit score if you use them strategically.

Achieving the Best Credit Utilization Ratio Through Credit Cards

The amount of credit you’re actively using compared with the amount of credit available to you—based on your credit card limits—is known as your credit utilization ratio. This ratio plays a big part in calculating your credit scores. Even if you pay your balance off at the end of every month, the amount you charge still goes into determining your utilization ratio.

What Is a Good Credit Utilization Ratio?

Generally, you want to keep your credit utilization ratio under 30%, but lower than that is even better.

The thing that matters the most in utilization is your total balance as a percentage of how much credit you have available to you. The sweet spot is under 10%—keep it between 1% and 9” to earn the highest scores.

How to Decide How Many Credit Cards You Need

The number of credit cards you own can help you maintain a low credit utilization ratio, and there’s an easy two-step formula to determine how many cards you need:

1. Check Your Statements and Add Up Your Monthly Balance

Start by pulling all your credit card statements from the last year. Add up the statement balance for each month across all your credit cards and average that number. If you want to keep your utilization under 10%, the amount of credit available to you should be about 10 times the amount of your average monthly balance across all cards.

For example, if your average monthly balance is $1,000, you want an aggregate credit limit of $10,000 or higher.

2. Compare Your Typical Balance to Your Credit Limits

Next, check the limits on all your credit cards and add them up. If the credit limit is less than 10 times your average monthly balance, you will want to open up new cards to get to the necessary credit limit level. (Note that your credit scores can take a small, temporary hit when you apply for a new account, but they recover quickly if you maintain good credit habits.)

However, you won’t necessarily know what credit limit will be granted to you when you apply for a new card, so you may have to go through a period of trial and error. Alternatively, you can also request a credit limit increase on an existing card.

Maximize Your Credit Card Rewards

Another benefit of owning credit cards is earning points, miles or cash-back for spending you will do anyway. In addition to a basic, no-frills credit card with a low-interest rate, adding a rewards card is a smart strategy.

1. Choosing the Best Rewards Card for You

To determine what kind of rewards card you should get, look at the type of spending you most frequently do by pulling your previous credit card statements. That’s because there are rewards cards for every kind of purchase. Some offer you more points for spending on travel, while others give you better cashback for purchases on gas or groceries.

Once you know where you spend most of your money, apply for the rewards card that is likely to maximize points in the categories most frequent for you. If you don’t want to calculate all that, look for a flat-rate cash back card that gives you at least 1% or 2% back in all categories of spending.

2. Rewards Cards Often Carry Higher APRs

However, it’s important to note that rewards cards typically come with higher interest rates. You should only use rewards cards if you pay your balance off every month. Otherwise, any cashback you earn will be wiped out by the interest you accrue.

Drawbacks of Owning Too Many Credit Cards

Having too many cards, especially when you have more than you need for a low credit utilization ratio, can be detrimental, depending on your spending habits.

  • Inquiries Can Impact Your Score: Remember, every time your open a credit card, you get a hard inquiry on your credit report. That can ding your credit scores. Too many card applications could bring your scores down.
  • Track Your Spending: It can also be more difficult to keep track of spending across multiple cards if you have too many. To help manage your credit card spending, try using a money management site like so you can get a snapshot of all your cards in one place.
  • Watch Out for Fees: Finally, make sure you’re not paying unnecessary fees on credit cards you don’t need. Many rewards cards levy annual fees on their users. If you don’t need the card for a specific reason (like travel rewards), consider closing the credit card. If you need the credit limit for a better utilization ratio, open a card that doesn’t carry an annual fee.

Source: Experian