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How Many Credit Cards Should You Have?

Credit cards can help you build a healthy credit history if you manage them properly. You may also benefit from rewards like cash back or points to be used for travel or other things you enjoy. Given these factors, it’s no surprise that 42% of U.S. consumers are planning to apply for a new credit card within the next year, according to data from the TransUnion Consumer Pulse Study.

So, how many credit cards should you have? As with most personal finance or credit questions, there’s no one answer that applies to everyone. The right number for you depends on your habits, goals and credit history. However, these are some of the considerations to make:

Is it good to have multiple credit cards?

There may be advantages to having more than one credit card. Some people may open up an additional card or cards to transfer a balance using a low or promotional interest rate. Or, you may want to take advantage of cash back or opportunities to earn travel points with different cards.

Credit cards also tend to come with more fraud protection than debit cards. Having multiple credit cards can be useful if one is compromised or lost. If someone makes fraudulent purchases with your debit card, you may be liable for part of the charges. For example, if you lose your debit card or it’s stolen, you need to notify your bank within two days of the loss. If you don’t, you could be liable for up to $500, according to the Consumer Financial Protection Bureau. With a credit card, you’re only liable for up to $50, per the Fair Credit Billing Act.

How multiple cards can impact your credit

As you consider how many credit cards you should have, you’ll want to think about the potential impact on your credit. Applying for a new card can result in a hard inquiry on your credit report, which remains for two years. This may cause a temporary drop in your credit score.

In addition, a new card may impact your overall credit utilization. A major credit scoring factor, credit utilization is the ratio of credit you’re using compared to your total credit limit of your revolving accounts. This includes all of your credit cards. Aim to keep your utilization ratio below 30 percent; the lower, the better.

It’s important to know how adding or removing accounts may affect your credit limit and utilization rate. For example, transferring a balance between two existing cards won’t change your utilization rate. However, opening a new credit card will increase your credit limit. And if you close an account, your utilization rate may increase because you’ll also lose access to that card’s credit limit.

Other considerations around multiple credit cards

Before taking out a new credit card, take time to reflect on your overall financial picture. Are you keeping up with your bills today? You don’t want to get yourself into a situation where you’re spending more than you’re taking in. Transferring a balance to another credit card with a lower or promotional interest rate can help you save money in the short term, but new accounts won’t help curb poor spending habits. If taking out a new credit card tempts you to overspend, you may want to avoid it.

Also think through the practical implications of a new account. Would you be stressed by the prospect of managing multiple accounts, each with different payment due dates? Payment history is one of the most important credit score factors, so you don’t want to accidentally miss a payment. You may consider setting up automatic payments to help keep you on track.

Beyond making the monthly payments, you’ll want to check in with your accounts regularly to watch for any signs of fraud. If you do see something suspicious, here’s how to take action.

Fees are another thing to keep in mind. Some credit cards come with annual fees that can add up. For those that offer special perks, like travel cards, you want to be sure you’re using the benefits enough to justify multiple cards with annual fees.

How many credit cards is too many?

The right number of credit cards for you depends on multiple factors, from your budget to your approach to managing your money. You may know people who are hesitant to apply for even one card. Then, there are others who seem to have a wallet loaded with a card from every bank and travel company.

Before taking out a new card, you want to be sure applying for new credit fits with your credit goals and opens up the right opportunities for you. Carefully considering the impact on your credit health and overall finances will help you make a well-informed decision.

Want to keep growing your financial and credit knowledge? Next, read up on what’s considered a good credit score.

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. For complete details of any product mentioned, visit transunion.com. This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.

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