How Many Credit Cards Is Too Many?

Easy spending, enticing sign-up bonuses, cash back, and rewards: Credit cards are a pretty sweet deal. 

Two-thirds of American adults have at least one credit card, and the average person has 3.1 credit cards. If you’re keeping up with your monthly balance — meaning paying off the full statement balance every period — keeping lines of credit open won’t hurt your credit score. In fact, long lines of credit help prove your reliability to lenders.

At some point, the risks start to outweigh the benefits. Juggling different reward-earning options, statement periods, annual fees, and payments can make holding multiple credit cards unwieldy. When a credit card creates stress, it might be time to re-evaluate whether you should close the card.

There’s no one-size-fits all answer to the optimal number of credit cards you should hold. Instead, there are a variety of factors and measures you can use to consider how your credit cards are impacting your overall financial health.

Understand your credit score and utilization

We all know higher is better when it comes to your credit score. But what does that number represent, and how is it determined?

Your credit score helps a lender quickly decide whether to loan you money. The three-digit number represents the likelihood that you’ll repay a loan. Your FICO score, the most commonly used credit-scoring model, is a composite: 35% payment history; 30% amounts owed; 15% length of credit history; 10% times you’ve applied for new credit; and 10% credit mix, meaning the different types of credit you use.

Let’s home in on “amounts owed,” or amount of debt, which makes up 30% of your credit score. It’s reflective of how much of your credit line is being utilized. This number is likely the same as the balance you owed on your credit card bill. Experts recommend keeping your utilization below 30%.

For example, if my credit card has a $2,000 limit and I purchase $1,000 of electronics on Black Friday, I’ve utilized 50 percent of my available credit. It’s OK to utilize a high percentage of your credit line to make a big purchase, or in case of emergency, if you don’t carry the balance and pay it off in full. However, consistently high utilization negatively affects your score because it suggests you’ll have difficulty making future payments. 

Holding several credit cards and utilizing most of your credit line regularly will negatively impact your credit score. Exercise caution when carrying a balance or spending big on your cards. 

Choose cards wisely

Before applying for a credit card, think about the goals you have for the card: Is it rewards at your favorite clothing store? Is it earning an introductory bonus for spending a certain amount in the first three months? 

Do your research, and consider the card’s annual fee, reward-earning capacity, and interest rate. Know the difference between cash back, points, and store-specific rewards, and ask yourself whether you’ll really use them.

Pick a card that checks lots of boxes, such as a card that has high reward-earning potential on everyday purchases and no annual fee. If you open many cards with lots of perks but are splitting your spending between the cards, you’ll never reach your reward goals.

Go debit

If you’re worried about your credit utilization but still need a cashless solution, check out your financial institution’s debit card vs. credit card offerings. 

Although debit transactions don’t build credit, they also won’t hurt your score, regardless of the proportion of available funds you spend. You also won’t have to worry about missing a monthly payment because the money immediately comes out of your bank account.

The tradeoff, of course, is that you won’t be earning rewards on your debit card purchases. And few debit cards offer perks like purchase protection, which many credit cards do. 

Track your spending

One way to hold multiple cards while keeping your credit utilization low is to monitor your purchases instead of spending blindly. 

To start, do the math to calculate the amount of spending that’s equal to 30% of your limit. For example, if your total credit available across three cards is $20,000, 30% utilization is $6,000. However, if one of your cards has a limit of $5,000, you wouldn’t want to max out the card or utilize more than 30% of that credit line. Ideally, you’d spread your spending out across all three cards.

If this math and spending plan feels too complicated, you might consider reducing the number of cards you carry. How many credit cards is too many? The short answer is that it’s up to you, how you utilize your credit, and when you pay them off. 

If you’ve decided the amount of cards you’re holding is too many, don’t rush to close your old accounts. Keeping a long line of credit boosts your credit score and presents you as reliable to potential lenders. That way, when you do need a larger line of credit, you’ll be able to get it.