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How Many Credit Cards Should I Have - Coast Tradelines

Dec 19

How Much Credit Cards Should I Have? The Intersection of Credit Cards and Tradelines Explained


One of the biggest questions that people have in personal finance is "How many credit accounts should I hold?" This question becomes more important when you are contemplating adding tradelines to your credit score. Let's break down this subject giving you the knowledge and roadmap to make confident financial decisions.

The Conundrum of Credit Card Numbers: Why It Matters

The number of credit or debit cards you use is not only a matter of personal convenience. It also influences the credit score. Although you're aware that having a credit line can help your credit score, you're probably confused as to how many credit cards you should have.

The Pros and Cons of Owning Multiple Credit Cards

Before we begin to discuss the number of credit cards you need to have we'll first examine the benefits and downsides of owning multiple credit card.

Advantages of Owning Multiple Credit Cards

  • If you are a holder of multiple credit cards your credit limit could be greater. A higher credit limit can be beneficial for emergency expenses or large purchases.
  • Utilize credit cards that offer rewards and cashback offers to save you money when you buy items on a regular basis.
  • The ratio of your credit utilization is likely to increase. Your credit utilization ratio is related to the percentage of your available credit that you currently use. A variety of credit cards can increase your credit score through splitting your balances.

Disadvantages of Owning Multiple Credit Cards

  • Multiple credit cards can make you more likely to spend too much and end up in debt.
  • It's easy to make impulse purchases that you're not able to pay for when you're using a variety of credit cards.
  • The management of multiple credit cards could take the time and effort. More so if the payment dates are different.
  • More cards could lead to very high utilization of credit. A high CUR can negatively impact your credit score.
  • Different cards provide different perks. Having too few cards means missing out on many benefits.
  • On the other hand, having too many cards can make keeping track of payments due dates difficult. It could lead to unpaid fees and a degraded credit score.

Key Points to Consider When Applying for Credit Cards

  1. Different Benefits: Look for cards that offer perks, such as travel rewards, cashback or low-interest rates.
  2. Annual Fees Check to ensure that the card's benefits far exceed annual fees.
  3. Interest Rates: It is important unless you're confident you'll pay off the balance every month.
  4. Credit Limit: A higher credit limit can boost your credit utilization ratio, so long as you don't use it to the max.

Average Number Credit Cards Should I Have

After having looked at the pros and cons of owning multiple credit card accounts, let's take a look at how many credit card you should have. How many credit cards are excessive, and how many are enough?

Financial experts suggest having 3 to five credit cards for a complete credit profile. This offers a variety of advantages and improves the credit utilization ratio.

Factors to Consider When Deciding The Number Credit Cards to Own

Several factors must be considered when deciding how many credit cards to hold. These factors include:

  • Credit score and past history Your credit score and past history determine the number of credit card you should have. You may only qualify for one or two credit cards if have an unsatisfactory credit score or a poor credit history.
  • Earnings and expenses: Your income and expenses will also be important. If you have an excellent income and low expenses, you could have more credit cards than someone with a lower income and more expenses.
  • Priorities and financial goals Your financial goals and priorities also affect the number and type of credit cards you should have. If you're looking at improving your credit rating or earn rewards, think about having several credit cards.

Recommended Number of Credit Cards Based on Different Scenarios

Here are some recommended numbers of credit cards that are based off of different scenarios:

  • For people who do not have credit history: If you do not have credit history, then you might be eligible for one or two credit cards.
  • For those with average credit scores: If you have an average credit score you may be able to have three or more credit cards.
  • For people with outstanding credit scores: If you have an excellent credit score you can have at least four credit cards.

How Owning Multiple Credit Cards Affects Your Credit Score

After we've discussed how many credit cards you're required to have we can look into how using multiple credit cards can affect your credit score.

Positive Impact of Owning Multiple Credit Cards on Credit Score

Owning multiple credit cards can have a positive impact on your credit score in different ways that include:

  • Increased credit utilization ratio: Having multiple credit card accounts can aid in improving your CUR. It spreads your balances over multiple cards.
  • Diversified credit mix: A diversified credit mix can help improve your credit score.

Negative Impact of Owning Multiple Credit Cards on Credit Score

The fact that you have multiple credit cards can cause damage to your credit score these ways:

    • Greater risk of not paying and delinquencies: Having many credit cards can lead to an increased risk of avoiding payments. There is also the possibility of becoming indebted on your accounts.
    • Increased credit inquiries and new accounts: Applying for multiple credit cards could lead to multiple credit inquiries as well as new accounts. Both of these could lower your credit score.
    • A lower average age for your account A variety of credit cards can help lower the age average of your accounts. In turn, it can affect your credit score.
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