What’s the Best Amount of Credit Cards to Have?

Some consumers have no credit cards while others have 17. There is technically no correct answer since the question is undeniably subjective, but let’s face facts, 17 credit cards is probably going to be overkill for most people. Most consumers might do fine with a few credit cards while others will need more and some prefer cash. Only you can know what is best for you!

2-3 Credit Cards

Some consumers are in the camp that 2-3 credit cards are enough to allow you to purchase all that you need with credit and optimize your spending for rewards-based categories and cash back. The best way to handle this is by having one credit card that can be designated as a cash back credit card and one card that is purely optimized for spending categories. The cash back credit card can be optimized for solely receiving cash back rewards and can be utilized as your default credit card. The point of this is to use the default credit card whenever you have a purchase to make that doesn’t fall into one of your special spending categories (for which you ideally receive extra points or cash back, i.e. 3%, 4%-5%, etc.) The remaining purchases should than be focused on your special spending categories that give extra cash back or rewards-based points.

An Example of How This Should Work

Let’s put forth an example. You have one credit card that gives you 2% cash back on every purchase, this should be your default credit card. And then you have one credit card that gives you 3% back on gasoline, 4% back on groceries and 5% back on travel. In this scenario you should use your spending optimized category rewards credit card on those three types of purchases and your default cash back credit card on every other type of purchase. Unless of course gasoline is cheaper to pay with cash. Your default card should be used for all other purchases where rewards are not optimized based on what you’re purchasing. This will also have the added value of helping segregate your budget and allowing you to simply your finances somewhat. Your much more likely to know which card has what charge based on what kind of purchase was made.

Zero Credit Cards

Some consumers opt to have no credit cards at all. In order for this process to be successful you’ll have to make use of a lot of cash and use your debit card for most purchases. There isn’t too much to be said about this path except that there are some limitations with going this route. Firstly, you’ll need to be more cognizant of how much money is in your checking account at all times since if you’re using your debit card you don’t have credit cards acting as a buffer against your bank account. Second you won’t be able to readily dispute payments as easily as you would with a credit card (unless there is a more fraudulent claim, like your PIN or account got compromised in which case an investigation will occur). When payments are taken from a debit card, they’re usually gone for good. Finally you’ll miss out on rewards but you can also avoid many credit card surcharges that can sometimes be added on to your bill.

More Than 2-3 Cards

There is something to be said about consumers who have more than 2-3 credit cards, they could be extremely frugal and great at maintaining discounts at their frequently shopped stores or they could just be looking for trouble. For some consumers it makes sense to have a Home Depot, a Costco credit card and Amazon credit card, and all the other credit cards as well. If you are constantly frequenting these places and a majority of your money goes into these retail stores it could very well be worth it. These companies and their subsequent cards can really offer outsized benefits to consumers and can help them save a tremendous amount of money.

However, like anything else there can be extremes of this. If you have one cash back credit card that provides 2% cash back on everything, which is the same benefit you receive from one of your store credit cards, the utility of that store credit card becomes moot. If you are opening up store credit cards just for a one time visit to a store you don’t plan on ever going back to you really should reconsider opening those new lines of credit. They will make things messier down the line and more of a nuisance when managing your finances.

Using Credit Cards to Become More Credit Worthy

If your goal is to increase your credit worthiness, you don’t necessarily have to have a lot of open credit cards. In fact, too many credit cards and too many credit pulls could have the opposite effect and could actually hurt your credit score. Your goal should be to increase the credit availability and credit limit of each credit card you have, so that you can have the lowest utilization rate possible. In regards to credit, it’s typically more important to have a diversified credit portfolio and a large amount of available credit (based on percentage). As opposed to having a multitude of available credit cards, which will probably just sit in a drawer somewhere anyway.

How to Look for a New Credit Card

When looking for a new credit card, it’s important to look for a card that will align with your goals. If you already have a great travel rewards card then maybe try focusing on acquiring a great cash back rewards card too. Beyond this, you really shouldn’t feel a need to have more than more than 3 cards total, 1 for cash back, 1 for rewards and 1 as a backup. You can always get a Costco card if you go there frequently and spend a lot there but otherwise we can get over-encumbered with too many things in our wallet.

Although every consumer is totally different, I hold the personal belief that having a multitude of credit cards is usually “unnecessary”. Consumers should aim to have around 2-3 credit cards and try to make do with those. If there’s a select few places you frequently shop at that offer beneficial cards you can add some but try not to go overboard.