Skip to content Skip to sidebar Skip to footer

How Many Credit Cards Should I Have?

When it comes to credit cards, there are a few universal truths that almost everyone can agree on: a credit card can be a useful tool for establishing credit; missing a payment or canceling a credit card without cause is never a good strategy; and paying off your balance in full is the best way to avoid interest charges.

The question of how many credit cards one should have is one area where there is less agreement. Some people consider that using more than two credit cards is excessive, while others are used to using many credit cards.

The fact is that there is no hard and fast rule for how many credit cards are too many, and the ideal amount is highly dependent on your individual financial status and requirements.

How many credit cards should I have?

Have at least one

While there is no hard and fast rule about how many credit cards an adult should have (or how many credit cards are too many), it is advised that everyone carry at least one.

The reason for this is that credit cards play an important part in establishing a healthy and diverse credit score. This is significant since credit scores are used by everyone from lenders (such as banks) to landlords to determine whether or not a person is financially responsible and should be authorized for a loan - whether it's for a mortgage, auto loan, personal loan, or rental unit. The interest rate you pay on a loan is also influenced by your credit score.

Credit bureaus have less information about your financial history and how you handle revolving credit if you don't have at least one credit card linked to your name.

Is it bad to have a lot of credit cards?

When it comes to getting a second (or third, or fourth) credit card, there is no hard and fast rule that having “x” number of cards is bad. Carrying many credit cards may even be advantageous since it enables you to take advantage of rewards and advantages from a number of cards rather than just one.

Credit bureaus normally give greater weight to indicators like payment history (how consistently payments are paid on time) than the amount of credit cards in your wallet when calculating your credit score. Simply said, how many credit cards someone has isn't as significant as how they're handled, and someone with five credit cards may have a higher credit score than someone with two, depending on the scenario (or vice versa).

Choosing the appropriate amount of credit cards is therefore primarily a personal choice based on your present credit score, spending patterns, and financial situation. 

However, there are several principles that everyone should be aware of when it comes to acquiring new credit cards and how many credit cards might effect your credit score:

It's not a good idea to get numerous new credit cards at once, since this might result in several hard inquiries on your credit report, which may indicate dangerous behavior. As a result, building a robust credit card stack over time as part of a longer-term financial plan is always preferable than doing so in one fell swoop.

Credit history is important, as is credit card use experience. If you're new to credit cards, it's best to limit yourself to one or two instead of juggling many.

Having many credit cards might help you improve your credit score by lowering your use ratio. That's excellent news, since a lower usage ratio is usually preferable.

The proportion of your total available credit that you are utilizing is referred to as your utilization ratio. For example, if you owe $500 on one credit card and have a $1,000 credit limit, your usage ratio is 50% ($500 $1,000). Your usage ratio would be 25% ($500 $2,000) if you had the same debt and had two credit cards, each with a $1,000 limit.

In most circumstances, you'll want to keep your credit usage percentage around 30%. This is because, even if they pay off their bill in whole and on time, credit bureaus and lenders see people who routinely take up a big portion of their overall credit limit as riskier.

Multiple credit cards may help you enhance your credit mix and give extra data to credit agencies about your spending habits, both of which may boost your credit score.

An application for a credit card should never be taken casually or undertaken on the spur of the moment. Rather, each application should be based on a determined choice to either meet a need that your present cards aren't meeting or to update your wallet.

Opening new credit cards might reduce the average duration of your credit history, which may negatively impact your credit score. However, since credit history accounts for just 15% of your entire score, a little reduction in credit history duration is unlikely to have a long-term influence on your total score.

The benefits of having multiple credit cards

Maximize rewards (or minimize fees) for multiple spending scenarios

You'll be significantly more prepared to make the most of practically any spending circumstance if you have many cards at your disposal, whether it's earning extra points or avoiding fees.

Carrying the following three credit card kinds at the same time is a frequent combination:
A travel credit card or a cash back card to earn rewards on everyday purchases;
a credit card with no foreign transaction fees to avoid fees when making purchases abroad;
and a low interest credit card to use as a backup, such as when you need to make a large purchase that you suspect will result in you carrying a balance.

Another option is to keep a list of credit cards with varying extra benefits for various types of spending. Carrying both the Tangerine Money-Back Card and the SimplyCash Card from American Express is one of my personal favorites (1.25 percent cash back on every purchase). I utilize the first to earn 2% on my bonus categories, and the second to get 1.25 percent on everything else. I get more cash back every year by using both of these cards in tandem than I would if I simply used one of them.

Access to more credit

Greater credit cards equals more purchasing power. This may be useful if you find yourself in a situation where you need to spend more money than normal, such as if you need to make many significant purchases in a row or pay for a huge last-minute bill.

Back up payment options

Not all credit cards are accepted in all locations. While the American Express Cobalt is one of the finest credit cards for dining in Canada, many places do not take Amex. You may still utilize credit as a payment option if you have another credit card issued by Visa or Mastercard in this situation. The same can be said for Costco, which exclusively takes Mastercard.

Having numerous credit cards may also come in handy if one of your cards becomes inaccessible, such as if it is lost or frozen as a result of suspicious behaviour.

Improving credit utilization ratio

The amount of your total available credit you utilize (balance total credit limit across all credit cards) is a crucial component of your credit score and is usually represented as a percentage. In general, you should utilize less than 30% of your available credit limit. Increasing the amount of credit you have access to by getting a new credit card is one of the quickest strategies to minimize your usage percentage.

The possible cons of having multiple credit cards

More bills to manage

You'll have to keep track of many monthly statements if you have various credit cards, each with its own amount, payment due date, and interest rate. If you're new to credit cards and aren't used to dealing with varied billing periods, this might make handling your monthly expenses a lot more difficult.

More credit can be alluring

It goes without saying that having more credit cards implies having more credit available to you. If you're prone to emotional spending or have a load on your existing credit card due to overspending, adding another credit card to the mix may not be the best financial option.

Annual fees

You may have to pay numerous yearly fees depending on the credit cards you sign up for. That could work if you maximize your privileges and earn more in rewards than you spend in fees, but that isn't always the case. Consider browsing for no-fee credit cards if you're wanting to add more cards to your financial armory.

On a related point, if you have an older annual fee credit card that you seldom use, it's worth contacting your card issuer to see if the cost can be removed or if a no-cost option can be substituted. You'll be able to get a new card without having to pay several yearly fees.

Multiple credit card applications can (temporarily) impact your credit score A hard inquiry will be made on your credit record for each credit card application you submit. While these queries are rarely serious and usually just result in a short hit to your credit score, they may be connected with hazardous behavior if they are done at the same time.

While the effect on your credit score may be transient, if you intend on making a major financial choice in the near future, such as applying for a mortgage, it's best to avoid shifting about your credit card stack.

How many credit cards does the average Canadian have?

While data vary depending on the poll, the common belief is that the typical Canadian owns many credit cards.

The typical Canadian utilizes two credit cards for daily expenditures, according to a JD Power poll performed in late 2018. (based on their spending over a three-month period).

In 2017, the Canadian Banking Association claimed that 73 million Visa and Mastercards were in circulation throughout the nation, which equates to around 2.4 credit cards per person for Canadians over the age of 15.

According to TransUnion, there were 40 million active credit cards in Canada in 2016, equating to an average of 1.4 credit cards per person based on the country's 2016 population (excluding those less than 14 years old).