It’s nearly impossible to function in modern society without having at least one credit or debit card. In fact, the average credit card holder owns 3 or more credit cards, according to a recent Gallup poll. Cards are useful for making large purchases without carrying a lot of cash, for paying expenses over time, for online shopping, and for traveling—to name just a few reasons. But how many cards should you have?
There are valid reasons to have multiple credit cards—with one big caveat: You must be disciplined in your spending and responsible about your payments. If you can’t resist using cards up to their limits or if paying bills on time has been an issue, you probably want to keep your use of credit cards to a minimum—a debit card and maybe one credit card to use when cash is not convenient.
For the disciplined person, however, having multiple credit cards may make sense for the following reasons:
You’ll never get caught without a card
One of the most obvious benefits of a credit card is that you don’t have to carry a lot of cash to make large purchases. Unfortunately, not all merchants accept all credit cards. If you only have an American Express or a Discover Card, you may want to consider getting either a Mastercard or Visa, which are more widely accepted. Conversely, some merchants only accept American Express.
Also, if a charge is ever declined on one card, it’s helpful to have another in your wallet as backup, especially if you’re traveling. Some experts recommend keeping a card with a zero balance with you in a safe place in case of theft or loss of your other credit card. By having a card in reserve, you’ll still be able to charge purchases while you wait for your other cards to be replaced.
You’ll have dedicated cards for different types of purchases
Many people find it useful to keep a dedicated card with a low credit limit just for online purchases. This strategy reduces the risk of fraud, although most credit card companies have a zero liability policy if a lost card or fraudulent charge is reported promptly. Some banks and credit card companies even offer temporary card numbers you can use for online purchases or when traveling to minimize the risk if the card is lost or stolen.
Additionally, some people like to keep one card exclusively for expenses that will be reimbursed by their employer, both to make it easier to track the expenses and to avoid sharing their other personal credit card purchases with their employer.
You’ll have different cards for different rewards
For those who are eager to benefit from rewards programs, different cards may have different strengths. Some may be good for accumulating frequent flier miles and others for cash back, gift certificates or free gas. Some programs also have a limit on the rewards you can earn, so having multiple rewards cards ensures you can earn rewards from all your purchases.
You’ll get payment flexibility and interest rates
Spreading transactions over multiple cards instead of accumulating them on just one card can spread payments throughout the month, making them easier to manage. Many cards also offer an interest-free grace period for new accounts or balance transfers. If you have a large purchase you expect to pay off over a few months, you may want to consider adding a new card or transferring your balance to a new card to save in interest charges.
Different cards also come with different interest rates. You may want to have a card with a low interest rate for purchases you need to pay off over time, whereas a card with a higher rate but better rewards may make sense for everyday purchases that you intend to pay in full each month.
You’ll help improve your credit score
Having several properly managed credit card accounts can improve your credit score because it demonstrates that you can manage credit responsibly. The emphasis here is on properly managed, however: You should be paying off your monthly transactions in full or, at most, carrying a balance of no more than 10% to 30% of your credit limit, and you should make all payments on time.
The ratio of your used-to-available credit is one of the major factors in determining your credit score. If you “max out” all your cards or miss payments, you will hurt your credit rating.
You also should avoid churning credit card accounts: Every time you close a credit card account, voluntarily or not, it hurts your credit score, and every time you apply for a new credit card, it may reduce your score, albeit slightly.
You may want a card for foreign travel
Besides the security of having a card specifically for use while traveling, charges made in local currencies may be treated differently by different credit card companies. Call your credit card company before you travel to make sure you understand any currency conversion or foreign transaction fees you may incur when using the card abroad. If you’ll be paying a premium for the convenience of using the card abroad, consider picking up a different card with lower fees for foreign transactions. (Be sure to check that any new card will be widely accepted by merchants wherever you’re planning to travel.)
What is the optimal number of credit cards? Some people can manage a dozen or more cards to achieve whatever rewards objectives they have in mind, whether a gift card for going to the movies or miles for a trip to Europe. Making all your payments on time and keeping your balances low also will tend to strengthen your credit rating. For others, three or four cards may be all you want to manage.