Are you worried that the number of credit cards you have could have a negative impact on your financial life? Is there a “right” number of credit cards for one person to have?
The answer is a little more nuanced than an exact number.
Money expert Clark Howard believes that you should have at least two credit cards, but the opportunity for more is there for consumers who want to be aggressive in pursuing rewards programs.
In this article, I’ll walk you through some of the things you need to consider before deciding how many credit cards are right for you.
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How Many Credit Cards Should You Have?
Let’s start by talking about the minimum number of credit cards you should have in your wallet. In most cases, the answer is “at least two.”
While Team Clark advises against signing up for credit cards if you have trouble controlling your spending or difficulty paying off your balances in a timely matter, there are some undeniable advantages to spending with a credit card.
Not only can you earn things like cash back or travel rewards with every purchase you make, but you also get protection against fraud, much better protection than you can get with a debit card. You can read more about Clark’s strong preference for spending with a credit card here.
You may be wondering why two is the minimum number. Clark’s “Noah’s Ark” rule will help explain that.
Clark Howard’s “Noah’s Ark” Rule for Credit Cards
While there may be some debate on the maximum number of credit cards that are right for a person, Clark says there’s no debating the minimum.
“You should always have [at least] two credit cards,” Clark says. “Never one. And never two from the same issuer.”
Clark says it is important to keep two different lines of credit open from two different card issuers just in case one of your issuers decides to close or severely limit your line of credit. That’s why he says your two cards should be from two different companies.
Clark also says that having two credit cards can help many consumers with their credit scores by improving their credit mix and keeping credit utilization percentages lower.
Note: When referencing card “issuers.” we’re talking about the bank that issues them (Capital One, Chase, Citi, etc.). This isn’t to be confused with Visa and Mastercard, which simply process transactions and don’t have a say in your credit limit.
“I’m thinking about this from a defensive standpoint,” Clark says. “I’m thinking about your credit score and how secure you are in that credit when the economy gets tougher — which eventually it always does.”
How Many Credit Cards Is Too Many?
Clark says you should have at least two credit cards, but is there a maximum amount of credit cards you should have?
Clark’s acknowledges that there may be more advanced credit card users who want to be more aggressive in chasing rewards. In fact, Clark has five personal credit cards in his wallet.
If you’re comfortable being more aggressive, you may be considering applying for several of the top rewards credit cards on the market.
Credit Card Expert Jason Steele’s Take on Chasing Rewards
We sought the advice of credit card expert Jason Steele to help determine how many cards are “enough” to get the most out of the credit card rewards market.
Jason is the founder and producer of CardCon, which is The Conference for Credit and Credit Card Media. He’s also a contributor to Team Clark’s credit card content, and he says that there is no true “maximum” number.
“The right amount of credit cards to have is no more than you can manage responsibly,” Jason says. “For some, that’s zero, but for others that could be many. As far as your credit score is concerned, having five is ideal, but there’s no benefit to having more than that.”
Jason says the key to maximizing credit card rewards on your purchases is not necessarily stuffing your wallet with as many cards as possible. Instead, it’s about being intentional about choosing credit cards that have rewards programs that complement your spending habits.
“For experienced credit card rewards enthusiasts, more cards can offer more rewards and benefits,” Jason says. “You might have one card for gas, one for groceries, one for dining and another for purchases that don’t qualify for any bonus. You may also wish to have a small business credit card to keep track of those expenses, even if you just own a rental property or buy and sell things online.”
Does This Impact My Credit Score?
Like most things in your financial life, there can be credit score consequences to the number of credit cards you carry in your name. But it may not necessarily be the impact you expect.
There are both positive and negative credit score consequences when you change the number of credit cards in your wallet.
Let’s walk through some things you should consider about your credit score.
- Applying for credit cards can cause a temporary dip in your credit score. New credit inquiries, which are usually processed by a card issuer when you apply, factors into about 10% of your score. The good news is that these little dips roll off over time, making the impact of applying for a card temporary.
- Your credit utilization rate goes down with more credit cards. This is a way that having 2-4 credit cards can positively impact your credit score. The more cards you have, the more credit you have access to each month. By not using that credit, you’re showing that your revolving utilization rate is low. This factor makes up 30% of your credit score.
- Credit card payments can build strong credit history. Keeping a credit card open for a long period of time can help with your length of credit, which makes up 15% of your credit score. This portion of your score is calculated by the average age of your credit accounts, so it make take a little while for this to be a positive for your score.
- Missed payments can really damage your credit score. The more credit cards you have, the more likely it is that you’ll forget to make a payment on time for one of them. Late or missed payments impact 35% of your credit score.
What’s the Right Credit Card Mix for Your Wallet?
Now that you know the factors involved with making credit card choices, are you ready to choose the right ones?
Here’s a couple of questions to ask yourself as you’re deciding:
- Where do I spend my money? Credit card rewards are often geared toward spending in certain categories (grocery, travel, etc.) or at certain stores (Costco, Walmart, etc.) Knowing where you spend your money and what type of category those purchases fall into can help you decide which types of rewards cards would be useful to you.
- Do I plan to carry balances on my credit cards? If the answer to this is “yes,” you may want to avoid rewards cards altogether. Instead, Clark recommends that you check with your local credit union for a credit card that has a low, fixed APR. You’ll save more money with a lower interest rate on your balance than you’ll ever earn in rewards.
“If you’re going after rewards credit cards and running balances, you’re really not treating yourself well,” Clark says. “Because whatever you’re paying in interest is going to way outstrip whatever the rewards would be.”
Once you have a good idea of what makes sense for your personal financial situation, it’s time to research individual credit cards. Team Clark has you covered with roundups on the best offerings for many different types of credit cards:
- Cash Back Credit Cards
- Rewards Credit Cards
- Travel Credit Cards
- 0% Intro APR Credit Cards
- 2% Cash Back Cards
- Small Business Credit Cards
- Secured Credit Cards
- Balance Transfer Credit Cards
So have you decided how many credit cards should be in your wallet?
As you can see, after we dug into this with our experts, we learned there is no “perfect answer” for how many cards you should carry.
But we have definitely uncovered a few key takeaways that can help you make the best decision for your situation.
- Clark says most consumers should have at least two credit cards from different issuers. This helps diversify your risk if one of your credit lines is diminished or eliminated, and it also has positive impacts on your credit score.
- Jason says that having more than two cards can open you up to category specific rewards without adversely impacting your credit, assuming that you can remember to pay each of these cards on time and in full.
- If you’re going to carry a balance on a credit card, you should consider APR over rewards when picking your cards.
- If you have had trouble with spending that has led to serious credit card debt in the past, you may want to avoid applying for credit cards altogether. We’d rather you stay out of debt!
How many credit cards do you have in your wallet? How did you make your choices? Tell us in the comments below!
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