How many credit cards should one hold?

Quite often an irresistible offer or a valuable feature of a credit card leads many of us into applying for that new card. As a shopping enthusiast, you may find a card very appealing if it offers amazing deals on apparels and gadgets. As a frequent flier, you may like to have a card that offers the highest rate of air miles accumulation and smart conversion options. Passionate savers may love to have a card with the highest cash-backs, reward earning rate and attractive redemption choices. The list can get longer and when you keep adding all such cards in your kitty you are bound to end up with too many credit cards. It becomes difficult to keep track of your spending and do timely repayment of each card. So most people often are confronted with the question of how many cards should they ideally have. As per TransUnion – a US based Credit Report Agency – each US credit card holder on average had 2.7 credit cards at the end of March 2017. So what should be the ideal number for you?

The risks of going for too many Credit Cards

Frequently applying for a new credit card is taken as a negative credit behavior. It may adversely impact your credit score. With bigger credit limit at your discretion, due to a higher number of credit cards, there is a likelihood of you going for higher and impulsive spending. As a result, you may create a higher debt obligation than what you can easily repay. Moreover, if this spending behavior is not checked on time, it may lead you into a debt trap. With a higher number of cards your cost of maintaining these cards goes up due to the annual fee, finance charges, and penalties. There are many cards, which have features to waive off your annual fee if you spend a certain amount within a year. But, when you have too many such cards, it becomes difficult to keep a track and meet individual annual spending limit of each card. Hence you may end up paying considerable annual fees on these cards.

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But there are benefits as well

The higher credit limit may raise your ability to meet most of the emergencies. This can significantly reduce your need to have a higher emergency fund in your saving bank account so you can invest this money instead. Prudent usages of these credit cards can help you get hold of a variety of deals and rewards. If you control your spending from going up even after getting a new card then your proportional debt utilization comes down. It is considered positive action and can help in improving your credit score.

Then what is the ideal number?

A person who is not responsible can mismanage even one credit card but there are many people who are efficiently managing a large number of cards. Therefore, there is no magic number of cards that can be said to be ideal for everybody to have. It varies for each individual based on their need, usage pattern and repayment discipline. Your first credit card enables you to build and maintain a credit history which can help you get easier access to loans in future. It is easier to manage one credit card because you just have to remember one due date. However, you may also become helpless if it does not work due to technical error or if it is misplaced, lost or stolen. In such a situation, a second credit card may work as a backup. Furthermore, in case of an emergency, the credit limit of one card may not be sufficient. So an additional card second card, which increases your overall credit limit, may enhance your ability to manage such a situation. With the passage of time, even when you have two credit cards, you may go for the third one if you find it to be highly rewarding to your specific spending pattern. as your income grows, you may add new credit cards based on your overall credit limit requirement. Some cobranded cards offer better value on popular spend categories such as air travel, rail travel, metro travel, fuel refilling, store-specific shopping, online purchases and so on. Based on your preferences you may also go for 2-3 such cobranded cards.

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Get what you can manage well

It would be better if you can keep the number of credit cards to 2-3. However, if you find good merit in a new credit card, it does not matter how many cards you hold if these are within your overall prudent credit limit need. However, you should go for it only when you are confident about managing these cards well. You should be comfortable in managing these and also need to be highly disciplined in clearing the outstanding of all credit cards by their respective due dates. If you realize at some point of time that you have too many cards, which are becoming difficult to manage, you should not hesitate in closing some of the cards.

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