1,2 or 3? How Many Credit Cards You Should Carry?

Last Updated : Aug. 6, 2016, 6:33 a.m.

When it comes to deciding on the right number of credit cards to carry, it would not be wrong to say that there is no specific number that one should consider. However, as far as owning the multiple credit cards is concerned, it has its own advantages as well as disadvantages. Yes, a good credit score, lower insurance rates, and benefits of the card are some of the positive features. Whereas on the other hand, having multiple cards can affect your credit history very badly. So, don’t worry as this article helps you in deciding on the right number of credit cards that you should carry.

Credit Score Does Not Matter Much

Yes, you heard that right! Credit score is calculated by credit bureaus and is not affected much by your credit card numbers. Well, the number of cards majorly affects the type of card you use. Moreover, one of the most important factor associated with multiple cards is to make sure that you pay all the bills in a timely manner, and should know how to utilize the card smartly.

Furthermore, the number of credit cards is usually related to your credit score. Those who are having good credit score can have more credit cards. And, if you are a frequent traveller, movie lover or shopaholic, several cards with high travel, movie and shopping rewards feature would be good for you to have.

Moreover, your credit score does not decrease as you own multiple credit cards. But, one thing that needs to be mentioned here is the fact that opening and closing many credit cards immediately is absolutely not a good idea.

Higher Credit Limit
Moreover, the debt you own on the credit limit you are eligible for, is actually a crucial factor that usually influences the number of cards you should own. Yes, because every credit card you add, your credit limit automatically increases, and the debt to the credit ratio will get reduced, which is provided you do not add additional debt.

Let’s try to understand this thing with an example below:

Suppose you have credit card whose limit is Rs.80,000. You used your card for all your monthly expenses, and now you have a balance of Rs. 40,000 (which is 50% utilization). So, now if you buy another card with Rs. 2,50,000 limit, you can reduce your overall utilization to 10%. Well, doing so, will create a good impression of you on the lender, and it is also good for your credit score.

Actually, the debt you owe for each credit card of yours will help in spreading the debt, and protecting your score as well. Thus, in a situation of debt having minimum number of three credit cards would be of great use for you. However, instead of going for a fresh card every time, its better and possible to ask for an increase in the credit limit on the same card you own. This thing will have a similar effect on your credit score improvement. In fact, it will also help in eliminating any spending that you do towards opening a new account, and now don’t have the hassle of managing the multiple cards. Well, if you are having a good credit score along with a longer span of your credit history, experts say that opening a new account will not going to affect your score badly.

Avail More Benefits
Since each credit card comes with great offers and rewards, so if you have multiple cards, it will help you to make the use of different rewards and offers associated with each card you have. What you can do is, you can make the most of a card whose having more cash back rewards for groceries and fuel, along with a card that comes with travel points, when you travel or dine out. Through this way, you can maximize the benefits that you usually get in a card.

Furthermore, Visa, American Express and MasterCard have their own reward programs for all their cardholders. In fact, few perks like auto rental insurance, price protection and many more perks are also present with these cards. So, depending upon your needs and usage, you can select a card, offering maximum benefits to you.

Keep an Eye on the Cons
Well, the above mentioned reasons may make you prefer to have multiple credit cards , but before going for them, it is important for you to know the drawbacks of it. Yes, for your reference, below are some considerations to note:
• Try to avoid opening the multiple credit cards at the same time just for the sake of availing the attractive benefits and perks. Your new card can reduce the average age of your credit history that you had maintained earlier. Hence, this thing will create an impact on your chance of taking a big loan in the future.
• Yes, it is quite a tough job to maintain multiple credit cards. So, in order to avoid closing a card because of an inactive account, you should use that card often. If you close your account, it can affect you score by reducing its total credit limit.
• If you are having a card that has an annual fee, you should downgrade it to a no-fee version in order to avoid paying the fees.
• The more credit cards you have, the more they induce you to overspend, especially if you want to avail the rewards while meeting the minimum requirement of spending.

Thus, in a nutshell, it would not be wrong to say that multiple credit cards have their own advantage and disadvantage, the disadvantage of luring you to spend more. Well, this thing can actually hurt your financial standing, and also invites the late fee along with higher interest rates as penalty. But, one thing that needs to be mentioned here is the fact that if you behave responsibly while ensuring that your spending is under control along with paying the bills properly & maintaining a low balance, there is no denying the fact that these additional cards won’t affect you. Actually, the key lies not in the numbers of credit cards, but it is all about managing them smartly.