A question many people ask about credit cards is, "what is the best number of credit cards to have for my credit?" The answer actually depends on your credit. There is an ideal number of cards for someone building their credit, someone else rebuilding their credit, someone who pays off each card consistently each month, and someone who seeks to maximize rewards. Depending on which of these people you are, you’ll find a different number of credit cards is best for your situation.
The 5 factors that affect your FICO credit score are payment history, credit utilization, length of credit history, new credit and credit mix. Payment history and credit utilization are the top 2 most important factors, accounting for a total of 65% of your credit score. You should keep this in mind when considering how many credit cards you should have. To learn more about these credit score factors, read 5 Factors That Determine Your Credit Score & Important Tips.
Someone Building Credit
If you are just starting to build your credit history, you likely have few to no credit accounts and are looking for some guidance about how to build your credit to eventually get a high credit score. You should start out with 1 credit card and use it to get used to paying off the balance each month. Paying off your balance in full each month helps both your credit history and credit utilization. This credit card will most likely have a low credit limit, unless you have a cosigner. Learn more about how to build your credit by reading Best Strategies To Start Building Your Credit.
Someone Rebuilding Credit
For those of you who are rebuilding your credit after a negative credit event, you should use 1 credit card to build your credit history and keep your credit utilization low. If you are unable to get approved for a traditional unsecured credit card, consider getting a secured credit card and pay it responsibly to help your credit score increase. Alternatively, if you are rebuilding your credit from multiple high credit card balances, you can transfer all of the balances to 1 credit card with a low introductory APR and then set a goal of paying off most or all of the balance before the introductory period ends.
Someone Who Pays Off Balances Each Month
If you are the type of person who pays off each credit card’s balance in full every month, first pat yourself on the back. You are using your credit responsibly and your credit score is sure to reflect that over time. For you, the ideal number of credit cards is 2-3, as long as any additional cards do not change your payment habits. Avoid opening multiple credit accounts in a short period of time though because that can negatively impact your credit score.
Someone Who Seeks Rewards
For the people who are trying their best to maximize the rewards they can earn with credit cards and are consistently paying their balances off in full, the ideal number of credit cards can go as high as 5 depending on your lifestyle. About 4-5 credit cards is generally enough to cover the major categories (travel, cash back, store card, etc.) to maximize your points back or cash back from all spending categories.
According to Experian’s State of Credit in 2019, on average Americans have 4 credit cards and the average amount of credit card debt is nearly $6,200. However, these numbers should not be used as a measuring stick for your credit card habits. Remember how you use the credit cards is more important than how many you have. For this reason you should make it a priority to pay at least the minimum balance each month and pay off as much of the total outstanding balance that you can.
To learn about how to be a successful cardholder in order to improve your credit, read 7 Traps To Avoid With Credit Cards.