How Many Cards Do I Actually Need?

There is no “right” amount of credit cards; no magic number that places you squarely on the road to good credit and covers you in case of life’s many emergencies. Averages tell us the typical American has between 5 and 10 cards, with some individuals carrying many, many more.

Rather than focus on a number of cards, expects urge you to consider how much debt you can afford to pay off every month, and seek out the card or combination of cards that allows you to build the most solid credit history.

The balance you carry on your card(s) is also crucial – the ideal is somewhere between 25% and 50% of your total credit line. Beyond that, creditors may perceive you as a risk for paying back their money, especially if something were to happen to you, such as a lost job. With high balances racked up, you lose your ability to be able to expediently pay the off if such a situation arises. If you need to make a purchase that exceeds 50% of one card’s balance, it may be wise to split it between two accounts. This is an obvious benefit of having more than one card.

Of course, the fewer cards you have, the easier it will likely be for you to keep track of them – when they are due, your current balances, the minimum payments, and so forth. It may mean that you are more likely to notice a discrepancy from what you are used to in looking at your bills, and be more likely to spot a billing error or instance of fraud. It may mean that you are more likely to keep up with the due dates, and pay your bills on time. If you need to update an address or phone number on all your bills, contacting multiple credit card companies may become a real hassle. And keeping track of the coming and going of actual cards when they expire and you are sent new ones – a key opportunity for fraud – may become more difficult when you have more of them to keep track of.

This does not, however, mean that you should go willy-nilly closing old accounts. Oftentimes, the accounts you have had the longest are the best building blocks of your credit, and the most telling reflection of many years spent diligently paying on time. Plus, closing too many cards may leave you with a worse debt-to-credit ratio – it will seem like you are carrying a higher percentage of possible credit on the cards you leave open, even if the balance remains the same.

The age of your accounts is always a big factor in determining your credit, so screen your accounts carefully when you are considering closing them. A long and successful credit history can only behoove you, even with more than one account open. Make sure however, not to let accounts go inactive by not using them for more than six months – this, too, can damage your credit score.

On the other hand, however, opening a couple of new accounts at any given time has its downsides, as well. You may find that, the more accounts you open, the less likely the card issuers are to give you high limits – they may not want to run the risk of you maxing them all out and not being able to repay. You may find it most prudent to hold fewer accounts with higher maximums than to hold several with smaller limits. Not only will this be more useful to you in the case of a necessary big purchase, but you won’t run the risk of having several accounts maxed out with small dollar amounts. Either way, an established history of paying at least the minimum on time on all your cards is a building block for good credit.

If you decide to go the route of holding multiple cards, it may be best to choose a combination of Visa, MasterCard, Discover, and American Express, which have the highest acceptance rates, as well as lower interest rates on the whole than department store or specialty cards. If you have more than one card that offers rewards or bonuses, you can always use the right card at the right time to get the maximum benefit from your purchases. You may save a low interest card for emergencies, and pay off your higher interest cards altogether each month, so that the actual rate doesn’t matter.

Regardless of the actual number of cards you carry, it is crucial that they are the ones best suited to you and your needs. The entrepreneur may seek out a small-business credit card that benefits him or her much more than a regular consumer card.

Overall, in deciding how many cards you want or need, it is crucial to keep your debt-to-income ratio in mind. Some experts suggest the magic number for this ratio is 36% or below, taking into consideration other obligations like your rent or mortgage, car loan(s), and other debts. Personally, you never want to have more accounts open than you can manage at any one time, whether considering your payments, or the time it will take to sit down and sort them all out so they get paid enough and on time.