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How Many Credit Cards Can I Have?
There is no official limit to the number of credit cards a person can have at one time. Amid the seemingly endless number of credit card options available, it's up to everyone to decide on their ideal number.
According to Experian, the credit reporting agency, the average person has about four credit cards. Multiple cards are the norm, but it’s important to understand how to balance your accounts properly. Let's take a look at how to decide on the right number of credit cards for you.
Factors to consider
One reason credit cards are so popular is that they can be used in so many ways. Credit card issuers offer many types of accounts to appeal to different consumers. That said, it’s up to you to check all the variables before deciding on adding a new card to your portfolio. Here are some things to think about:
Annual fees
Some credit cards come with annual fees, just for the privilege of having the account. Card issuers often waive the fee for the first year, then it will appear a year later on your bill as a lump sum. Plenty of cards in the marketplace do not charge fees. A fee might be worthwhile, however, if the card comes with a signup bonus that’s higher than the fee. Some cards have rewards, such as cash back or travel perks, that will more than cover the annual fee. People with below-average credit histories might decide to pay an annual fee because they can’t get a card otherwise. Evaluate any card to see whether it charges an annual fee and whether the fee is worthwhile for you.
What cards do you use on a regular basis and why?
Before adding a new card, review the cards you already have and how often you use them. Some people enjoy acquiring cards for different uses, perks and rewards. You might have a cash-back card for groceries and gasoline that you use regularly, but a bank is offering a card that gives a higher cash-back percentage. On the other hand, an offer for a travel rewards card might arrive in the mail, but your review of existing cards shows that you already have a card with the same rewards—and you have not used it in years.
Credit limits and credit utilization
Each credit card has a credit limit, which is the maximum amount you can borrow on that card. It's important to consider your overall credit utilization ratio, which is the percentage of your total credit limit that you're using. Keeping this ratio low (typically below 30%) can positively impact your credit score. Your credit utilization ratio, both for each card and your total debt, plays a big role in your credit score.
Budgeting and payment management
The more credit cards you have, the more chances there are of missing a payment. Multiple cards also give you more opportunities to borrow and build up debt. So, it's a good idea to have only as many cards as you can manage responsibly. This includes not only making all payments on time, but also paying off balances in full whenever possible to avoid high-interest charges. Creating a budget that accounts for all your credit card payments and ensuring you have sufficient funds to cover them is crucial in preventing credit card debt accumulation.
Rewards programs and benefits
Credit cards offer many types of rewards programs, like cash back, travel rewards, points for purchases, or discounts on specific categories like dining or groceries. Consider your spending habits and preferences to determine which cards' rewards align best with your needs. Having multiple cards with complementary rewards programs can maximize your benefits across credit card spending categories.
Monitoring
For some people, it's easy to stay organized, review each credit card statement and track their balances and due dates. Technology helps us with tools like budgeting apps and automatic payment plans. Missing payments or exceeding credit limits can lead to fees, increased credit card interest rates, and negative marks on your credit report. Ask yourself how many credit cards you can have and still stay on top of things. Besides simply keeping track of expenses, it's important to be on the lookout for credit card fraud. More cards can mean more credit card security risks.