Quick notes

 

  • When it comes to credit cards, there is no right or wrong amount for a person to have.
  • Paying off your balance each month will help build your credit history and keep your score high.
  • Where you can run into trouble with having too many credit cards is when you also leave high balances each month.

 

 

When it comes to credit cards, there is no right or wrong amount for a person to have. There are both pros and cons to using credit cards when it comes to how they affect your credit. On the one hand, you need a credit card to build your credit history. On the other hand, if you have a high revolving balance on multiple cards, this will reflect poorly on your score. To determine how many credit cards you should have, let us take a deeper look at how they impact your credit score.

How credit cards affect your credit score

When you are just starting out as an adult, it’s a good idea to start building your credit history. Lenders won’t know if you’re a reliable candidate for credit if you have no proof in terms of past credit history. One of the quickest ways to build credit is to open up a credit card. When you’re just starting out, you’ll typically begin with a low credit limit, so it’s easier to manage. You may even open one with your parents.

Paying off your balance each month will help build your credit history and keep your score high. As you get older and have more income, your credit limit will increase, and you may look to open a second card with more rewards.

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More cards can mean better debt utilization

When you have two or three credit cards with high credit limits, it’s best to keep paying off your cards each month or keep your balances as low as possible. In this situation, having more credit cards can be a benefit.

If you aren’t using all of your available credit, your score will be higher because you’re utilizing your debt better. Creditors and lenders will see that you aren’t maxing out your cards.

With more credit cards you can earn more rewards points

Another perk of having more than one card is that you can usually get a good rewards program with multiple cards. Rewards and credit card points can be saved and used for big-ticket items like airline tickets and hotel stays.

If you use your credit cards for almost everything and pay them off each month, you can rack up credit card points pretty quickly. This is like getting free money. You just have to be very careful not to overspend and make sure to pay off your balances each month.

More debt will lower your credit score

Where you can run into trouble with having too many credit cards is when you also leave high balances each month. If your credit cards are maxed out, your score will lower. Having multiple credit cards worsens the problem here.

The Federal Trade Commission allows you to download a free copy of your credit report each year. This can help you know where you stand credit-wise and recognize if you have too many or too few cards.

Essentially, the amount of credit cards you have isn’t as important as the amount of debt you have. Keeping your balances low or at zero is key to keeping your score high.

It’s also important to note that if you feel you have too many cards and want to close some, do this with caution. To close too many cards at once can raise red flags and negatively affect your credit score. Instead, pay off your credit cards and close them slowly over time. You may even consider leaving one or two open and just not using them. This will keep your credit utilization ratio low.

A deeper dive — Related reading from the 101:

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It can be shocking to look at your bank account after an intense spending run.