What’s the Right Number of Credit Cards?

At different stages of life, there are different numbers we aspire to: Tip-top SAT or ACT scores can help us get into the university of our dreams, or optimal cholesterol or blood pressure numbers can help keep us out of the doctor’s office.

While we know the numbers we want to reach in those cases, choosing the right number of credit cards is a bit more of a puzzle. It may be tempting to approach the question based on the choices of others—Americans have an average of four credit cards per person, according to the credit agency Experian. Then again, Guinness World Records reports that a California man has successfully opened nearly 1,500 valid credit cards.

Instead of looking outward, the best way to determine how many credit cards—and, importantly, which type of credit cards—are right for you is to carefully examine your own money habits, priorities, lifestyle and financial picture. One place to start is by asking why you have any credit cards at all?

Your answer will likely include at least one of the following: Credit cards allow you to make purchases online; serve as a lifeline in emergencies; offer perks, rewards and cash back; and help build the credit score needed to purchase a home or car. Thinking through your answer will help you decide how many and what types of credit cards are best for you.

Reasons to Have 1–2 Cards
Less can definitely be more when it comes to credit cards. In fact, having just one credit card may be your only option if you’ve never had credit of any type before. If you’re just starting your career or still in school, having a single credit card is smart because it means you only have a single bill to monitor and pay. While this may limit the variety and value of the perks and rewards available to you, it also limits the possibility that you will miss a payment, and get hit with a late fee. 

If you’re wary of credit cards in general, having a single card also saves you time and hassle when traveling; renting a car or a hotel room. And if you have a hard time keeping up with payment due dates, or are tempted to spend more because additional cards provide a higher spending limit, then it’s probably best to limit the number of cards you have.

But for those who want the additional rewards that can come from having more cards, the best way to qualify for multiple accounts is to first demonstrate your creditworthiness with one or two cards. 

Reasons to Have 3–5 Cards
Having three to five cards can make sense for reasons that have nothing to do with perks, cash back and rewards. The first reason is having access to credit when you need it. Many of us have been in situations where suspicious activity has prompted a bank or card issuer to freeze an account. Having multiple credit cards provides the assurance that you’ll likely always have a credit card that works when you need it.

While some prefer to limit the number of credit cards they own as a way to simplify their finances, others prefer to segment purchases by card—with one card for groceries, one for gas, one for travel.

That approach can make it easier to monitor, manage and control expenses. It also can maximize the credit card rewards you receive. For instance, some cards may offer 2% cash back every time you fill your gas tank, but only half that for other purchases. Other cards may provide higher cash-back rates for groceries than for other expenditures. Being strategic about which credit card you use for specific purchases is the best way to get the maximum rewards possible, though it does require planning, vigilance and attention. 

Another reason for having more credit cards is that you’ll have immediate access to a larger pool of money in the event of an emergency.

Reasons to Have 5 or More Cards
The concept of using individual cards for specific purchases—isolating individual types of expenses—is known as the island approach. For well-organized and savvy credit cardholders, this is a way to maximize the rewards they receive by always choosing the credit card that earns the biggest reward every time they make a purchase. Having five or more cards expands the menu and overall value of the available perks and rewards. 

Another potential benefit of having five or more credit cards is the flexibility it provides in managing the debt you accumulate. For instance, if you need to make a large purchase, you can opt to use the card that has the lowest interest rate, which means that you’ll end up paying less in interest if you’re unable to pay the debt off immediately. 

Multiple credit cards also provide the opportunity to take advantage of special, limited-time offers on everything from balance transfers to the purchase of airline tickets. Having five or more cards can certainly provide more rewards and advantageous debt repayment options. But taking full advantage does require a commitment of time and attention not everyone can manage. 

The Risks and Costs of Having Too Many Cards
People interested in building or rebuilding their credit score should have at least one credit card. Demonstrating the ability to pay your credit card bill on time, and not use too much of the available credit limit is a sure way to boost your credit score. People with excellent credit scores had an average of three open cards, according to an analysis by FICO, the company that calculates the most widely used credit scores.

If improving your credit score to get a mortgage or car loan in the near future is the goal, then it can make sense to have more than one credit card. If you have one card that you manage well, adding one or two more can instantly improve your utilization ratio—the amount of money you’ve borrowed versus the credit you have available—a major factor in your credit score. As a rule, you want to keep your utilization ratio below 30%. For a card with a $1,000 credit limit, that would mean keeping your balance below $300. But if you add a second credit card with a $1,000 limit and continue to maintain that $300 balance even though you have $2,000 in available credit, then your utilization ratio will instantly improve.

There are other important questions to consider when deciding to keep multiple credit cards in your wallet. Even if you determine that adding a new card or two will benefit your credit score, keep in mind that not all credit cards are equal in terms of the annual fees they charge (or don’t) as well as the perks and rewards they offer. 

The perks and rewards you receive for using particular cards can genuinely improve your life. According to a study by CreditCards.com, nearly 60% of Americans have at least one credit card that offers cash back on purchases. Additionally, a survey of credit cardholders by CreditCards.com found that 43% ranked cash-back cards as the best rewards card, well ahead of airline, hotel and general travel rewards cards.

If you’re considering adding a new card to your wallet because you want to take advantage of rewards, just be sure that the rewards are meaningful to you personally, and that the points and perks earned are of greater value than any fees the credit card charges.
 
There’s no magic number for how many credit cards you should have. But taking the time to consider why you have credit cards in the first place, how well you manage money today, and what perks and rewards matter to you will get you to the answer that’s best for you, aka the only answer that really matters. 
 
A former editor at Los Angeles magazine, Chris Warren's writing has appeared in publications ranging from Institutional Investor and Forbes to National Geographic Traveler, Oxford American and Greentech Media.
 
Do you know when to use a credit card and when to use a debit card? Find out here.