In today’s world, it’s normal for the average American to have more than one credit card. After all, the more credit you have, the more it shows that you are financially responsible. How many credit cards are too many? If you are using your credit wisely and keeping all of your credit usage below 30%, then having a lot of credit cards isn’t a problem. Read on to find out why too many credit cards can be too many and tips on how to manage it.
Factors To Consider
There are many of factors to consider for credit accounts. Every time you open a new account, it can be seen as a risk to future creditors, especially if you’re not using credit responsibly.
Here are some factors that should be considered:
- Payment history
It doesn’t matter if you have 1 or 10 credit cards, if you are keeping all of those under 35% usage, you probably won’t be seen as a risk. However, if you have most of them maxed out and 2 that aren’t, that’s when red flags can arise for creditors.
- Having the right amount of cards
The average American has at least 4 credit cards to their name. To a lender, that’s not an enormous flag as long the cards are being paid off and kept under a certain amount. If you are having a hard time, you’ll want to look into credit card debt relief to help you deal with the credit card debt.
It’s always best to start with one and be at least 18 years of age when you apply for a credit card. Having one is easy to manage and if you are keeping it under a certain percentage every month, then a couple more will be beneficial to your credit profile.
- Credit utilization ratio
When applying for new credit, lenders will see on your credit profile how much credit you actually use per month. For example, if your credit is $1000 and you’re putting $800 on that card monthly, your credit utilization is 90%.
When that much is used on a few credit cards, lenders can consider you as a risk. The reason for that is that there’s a high chance that you’re making a minimum payment or struggling to pay it at all. So while it’s ok to have a few credit cards, make sure that you can keep the ratio to a manageable amount on each card, which would be 30-35% maximum.
Be Selective Of Credit Cards
There are certain banks that will not allow you to apply for more credit cards after a certain number limit. So, when applying for credit, see what features the credit cards have. If there’s a certain reward you’re going for, making sure you read the fine print fully before applying.
Keep in mind of interest rate of credit cards. Depending on your credit score, interest rates will vary. If you have a good credit score, you can expect to get a credit card with great rewards and low interest rate. A bad credit score often yields high interest rate and, most of the time, little rewards.
Bottom Line
How many credit cards are too many? There isn’t a magic answer as it has so many variables. It depends on how you use the credit cards and if it’s kept at a ratio that is manageable, then having multiple credit cards isn’t a problem.
Having too many credit cards only becomes a problem when payments aren’t being made or it has a high utilization rate. You’ll want to use each credit card to your advantage and remember to pay your balances in full on due dates.