Rewards cards are enticing, especially when they come with major sign up bonuses. However, you’ve probably heard that having too many credit cards can actually damage your credit long term, which may make you leery to apply for multiple rewards credit cards.
How many credit cards is too many? That depends. My husband and I have both a Southwest Airlines Rapid Rewards credit card and a Marriott Bonvoy rewards credit card. We use both regularly, and often enjoy benefits and rewards from both cards when we travel.
How can you figure out how many credit cards you should have? Here are some questions to ask yourself if you think you might have too many credit cards, or are considering applying for a new one.
Are you spending within your means?
Whether you have 1 credit card or 10, make sure that you are spending within your means. If having multiple credit cards tempts you to spend more than you can afford to pay off each month, and you start carrying hefty balances over multiple cards, it might be time to consider a balance transfer and close some of your cards.
Are you making all your payments?
If you have multiple credit cards, and are having a difficult time keeping track of multiple payment due dates, that’s a warning that you may have too many open cards. Develop an organization system to keep track of your credit card payments, or pay off and close some of your cards so you’re sure to not miss a payment.
Does each card provide a specific benefit?
Does each of your cards serve a specific purpose in your wallet? If you have more than one card that provides the same benefits, and has the same bonus categories, what’s the reason for keeping them all? Make sure each card in your wallet serves a unique purpose and you aren’t overlapping benefits, especially if you are paying annual fees.
Are you breaking even on your annual fees?
Many rewards cards charge an annual fee, which isn’t an inherently bad thing. If you are using the annual benefits you get from holding that card, maybe a free hotel night each year or you get a certain number of bonus points on your card anniversary, and they are worth more than your annual fee, it’s worth it!
If you are letting the annual perks of your card go unused, however, and you’re paying an annual fee, it very well might be time to close that card. Annual fees are okay if you’re getting benefits to offset it. If you aren’t, or aren’t using them each year, that might be a sign you need to consider closing some cards.
How is your credit score looking?
Your credit score is made up of various aspects, and the number of credit cards you have can noticeably affect it. Payment history and amounts owed make up a large chunk of your credit score, so if you are making payments late (or missing them entirely) or have high balances, that can negatively affect your credit score. If you are applying for new cards regularly, that can drag your average length of credit history down which also affects your credit score.
On the contrary, responsible credit card usage can actually improve your credit score with more cards. Credit usage plays a role in determining your credit score, so if you have multiple credit cards with low balances, you’ll have a better credit usage rate. Also, keeping older cards helps your average length of credit history stay higher when you apply for new cards. Closing an old card to open a new one can actually hurt your credit score.
The bottom line is that there isn’t a set in stone number of credit cards you should or shouldn’t have. Some people are able to do serious damage to their credit score with just 1 card, and others have a great credit score with 20 different credit cards.
It all comes down to what works best for you and your family, and what you are able to manage efficiently. The right number of credit cards varies from person to person, so it’s up to you to determine what’s right for you.