Quantity Versus Quality: How Many Credit Cards Is Too Many?

Credit cards offer a convenient way to make purchases and build credit, but it's important to use them wisely and watch how many you accrue. Finding the sweet spot between convenience and potential pitfalls is key to maintaining your financial stability.

It’s not uncommon to question how many credit cards is too many, especially if you’re having difficulties managing the ones you have or are tempted to fill out another credit card application. With a little guidance on how to strike the right balance and properly manage your credit cards, you can find a number that supports your needs and financial goals.

How many credit cards is too many or too few?

The number of credit cards you have isn’t a factor in credit scoring formulas, like FICO or VantageScore, meaning there’s no penalty to your credit score whether you have one or ten cards. But there are indirect ways that a growing credit card collection could impact your score, especially if it affects your credit utilization or timely payments.

Your credit utilization rate is the percentage of your available credit across all your credit cards that you’re currently using. A higher rate can signal to lenders that you rely too much on your credit cards, while a lower rate implies better payment habits and balance management. While having more credit cards might increase your overall credit limit and help you keep your rate low (as long as you don't increase your spending), having too many cards could tempt you to overspend.

If you overspend and carry high card balances, your credit score will go down. What’s more, if you struggle to make timely payments due to overspending and high balances, this can reduce your credit score even more.

How many credit cards should I have?

Deciding on the right number of credit cards for you depends on your financial situation and your ability to handle credit responsibly. Here's what to consider based on your experience level and spending habits:

-If you're new to using credit, you may want to stick with just one credit card at first to keep things simple. Having a single card makes it easier to track spending and payments while you learn how to use and build your credit.

-As you get more comfortable with credit management, you might consider the benefits of having two credit cards or even more. For example, it’s good to have multiple credit cards if you want to establish more credit to help expand your credit history over time or increase your credit limit to improve your utilization rate.

-Different cards also offer perks like travel rewards or cash back on groceries. Applying for a rewards card that helps you earn money on your most common expenses can help you make the most of your credit card purchases and accomplish your financial goals, like planning a vacation and using reward points for travel.

-Think about how each new card fits into your financial plan. Ask yourself if the rewards and benefits of a credit card outweigh the responsibility of managing another credit line. It's important to consider annual fees, interest rates, and reward types.

To handle multiple credit cards well, make sure you can easily pay your bills. Try to pay off what you owe each month to avoid extra charges and growing debt. Managing several cards means enjoying perks while being mindful of your spending and payment habits.

How credit cards affect your credit score

How you use your credit cards and manage your credit card debt impacts your credit score — which ultimately determines your eligibility to get approved for loans, mortgages, and other types of credit. Here’s how:

-Payment history (35% of your FICO score): Timely payments are important because they show that you’re reliable in repaying borrowed money. Frequent late payments are red flags for lenders, indicating a higher risk of debt mismanagement. Consistently making on-time payments shows financial responsibility to lenders and positively influences your credit score.

-Credit Utilization (30% of your FICO score): Your utilization rate shows how much you rely on credit. A low utilization rate shows that you manage your credit and debt well, which can lead to a higher credit score. It's about balancing how much you should use your credit card and not maxing out your limits.

-Length of credit history (15% of your FICO score): A longer credit history provides more data to lenders on your borrowing behavior. Older accounts with a history of good payment management represent long-term financial responsibility, which improves your score. On the other hand, a short history offers less assurance to lenders about your financial behavior.

-New credit (10% of your FICO score): Opening several new accounts in a short period can suggest that you’re dealing with financial stress or have the potential to take on more debt than you can manage. Lenders view this behavior as risky.

-Credit mix (10% of your FICO score): Having a mix of credit, like credit cards, auto loans, and mortgages, shows you can manage different kinds of credit. Creditors and lenders like to see credit diversity because it shows responsibility and more financial experience.

Potential issues with having multiple credit cards

Having too many credit cards could derail your financial goals and hurt your credit. Here are four potential issues with having or applying for too many cards:

1. Applying for too many credit cards in a short time window

When you apply for a credit card, the issuer reviews your credit history, which shows up as a “hard inquiry” on your credit report to signal that you’re actively seeking new credit. One hard inquiry every once in a while will only have a temporary and minimal effect on your credit, but having multiple inquiries within a short time frame could reduce your score and signal to creditors that you’re a risk to lend to.

2. Managing multiple billing cycles

Managing multiple credit cards means keeping track of different billing cycles and payment due dates. The more cards you have, the more challenging this task becomes. If you lose track of your balances or miss payments, you could hurt your credit score or end up with an unmanageable amount of debt.

3. Timing credit applications with big future purchases

If you plan to make a significant purchase soon, like buying a home or car, you should avoid opening new credit cards in the months leading up to your purchase. Any dip in your credit score from a hard inquiry could affect your loan eligibility or interest rate.

4. Potential for overspending

More credit cards mean more opportunities to spend. If you spend more than you can pay back, you risk accruing debt and owing interest — which can build quickly. To avoid this, it helps to have a budget to control your spending.

Maintaining control and avoiding credit card overload

To build credit and keep a healthy credit score, you need to manage your credit cards effectively. But if you’re having trouble handling payments or keeping track of all your cards, apps like EarnIn can help you get your pay as you work.

If you’re relying too heavily on your credit cards, EarnIn’s Cash Out tool provides access to your earned wages, giving you an alternative way of handling day-to-day costs and unexpected expenses. You can get up to $100 a day and up to $750 every pay period with no credit checks, no interest, and no mandatory fees.

The EarnIn app also includes a free Credit Monitoring tool to keep a close eye on your credit score any time, at no cost. With these powerful financial tools, EarnIn gives you the backing you need to achieve your financial goals.

Plus, we can also help you strategize credit card debt repayment with our free credit card payoff calculator!

Download EarnIn now and experience money at the speed of you.