How Many Credit Cards Is Too Many?

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Should you have more than one credit card on hand at any time? If you have heard stories about people spending their way into a massive pile of credit card debt, then the answer might be an obvious no. In reality however, the answer is a little more complicated than that.

There can also be some major advantages to holding on to more than one credit card. Whether you have multiple credit cards or none, it ultimately boils down to how well you can manage them. After all, it is you who are responsible for your credit score, not the card itself.

Is it good to have more than one card?

One of the biggest things you need to consider about any credit card is your credit score. Over utilising your credit card can lead to a lower credit score. However, having multiple cards can actually increase your credit score if you are careful.

Some reasons why you should get more than one credit card:

As a back-up plan
It’s good to have another card to extend your credit limit. By spreading out your payments over different credit cards, your credit utilisation ratio will be lower for each card. This means that lenders will see that you are not maxing out your card limit every month.
To improve your credit rating
Establishing a good credit score for yourself involves having multiple, long-term credits in your name, and paying them wisely. To achieve this, you must show that you can use your multiple credit cards regularly and still pay it off every month.
To make the most of a specific card features
For example, by getting a petrol credit card, you can save through cash back or reward points on petrol spending, but it won’t offer much benefits for dining or travel. So, it may be better to find another credit card that rewards you for your specific spending categories.
To manage debt better with balance transfer
Getting another credit card with an attractive balance transfer package can help you save a significant amount of money in interest payments. Moving balances from high-interest cards to low-interest ones means saving a ton in interest payments and helps you pay debt down faster.
BUT, avoid making fresh purchases on your balance transfer card, or not paying off your balance transfer within the set 0% period, as the standard interest usually applies for new purchases and balance after the promotional period!

How many cards is too many?

For this question, there is no answer that is set in stone, mostly because everyone’s situation is different. A strong argument can be made for having at least one credit card to take advantage of the inherent convenience, security, and other benefits.

This is especially true today where cashless payments are becoming increasingly popular, partly due to the disruption caused by the COVID-19 pandemic. The justification for having more than one credit card can depend on whether you need the extra credit lines to help support your monthly budget.

But do watch out for these pitfalls of having too many credit cards:

Applying for too many cards at the same time can also lower your credit score
While getting a new credit card can sometimes improve your credit score by potentially lowering your total credit utilisation ratio, applying for multiple cards in a short period of time is not advisable.
Card issuers are not blind to those who attempt to game the system. They often have rules put in place to combat people who try to utilise as many cards as possible to gain rewards and then cancelling after meeting the minimum requirements.
Owning more cards than you need can be a risky liability
Another possible downside of having a large number of cards is that it can make you look risky to lenders and lower your credit score. As such, the best thing to do is to only apply and carry as many cards you need and can justify based on your credit score, ability to pay balances, and rewards aspirations.
More credit cards means paying for multiple fees and interest charges
One final thing to consider is that having multiple cards can mean multiple fees and interest charges which can eventually pile up in different places. Certain premium cards often come with annual membership fees and other cards may have newcomer rates that might rise exponentially after several months of membership.

Regardless, even having more than one card can be one too many if you are already finding it difficult to pay your bills!

The benefit of credit cards vary

Whether you are considering only one or multiple credit cards, understanding the unique benefits that each card offers is a key aspect of handling your credit. When getting ready to sign up for a first credit card, instead of grabbing the first offer advertised, do some research.

Try our Credit Card SmartSearch tool to help you find the right one for you.

As cardholders start to build a portfolio, they should consider how each card’s benefits can improve their lives in different ways, especially with regards to increasing credit score. The goal for any cardholder is to realise their own spending habits and how they can provide an opportunity to maximise their rewards and lower their credit utilisation rate.

What about emergencies?

In a best case scenario, you really should not have to use a credit card in an emergency. Ideally you would want to have enough money saved up in a savings account, to use during such occasions. But what if you are blindsided by unexpected expenses during a vacation overseas? P

In such cases, a credit card could come in handy. During times of crisis, having two or three credit cards can be useful when unexpected medical bills or job loss can drain your emergency savings. Ideally, these cards should have no annual fee, a relatively high credit limit, and a low interest rate.

Just keep in mind that it is very risky to turn to credit cards if you have already lost income. Doing so may lead to you taking on unmanageable amounts of debt.

Bottom line

Having multiple credit cards does come with a number of benefits, but only if you manage them responsibly.

When you have multiple cards on hand, you have to work to ensure that it works for you, not against you. Do this by being aware of the benefits that each card offers, your credit limit on each account, and most importantly your payment due dates.

Remember, each card you own should be used to your best advantage.