Should you have multiple credit cards? Pros, cons, and expert advice

Credit cards can be good and bad. A new card has a new financial obligation, in addition to more purchasing power. What is an acceptable limit for the number of credit cards to have too many and too few? Each individual has an ideal number, depending on their goals, lifestyle, and financial discipline. Together we can straighten out this complicated question and help you find that balance.

Understanding the basic

A credit card is a representation of your credit worthiness and not just a transactional tool. Depending on how you use them, you can have a number of cards, which can raise, or lower your credit score.

Pros of having more than one credit card

1. Improved credit utilisation ratio: Once you have more than one card then your total credit limit goes up, which in turn lowers your credit utilisation ratio, one of the three main components of your credit score.
2. Maximising incentives and benefits: Different cards have different benefits, some provide better value for shopping or savings on fuel and others are better for travel rewards. By having a mixture you can maximise the incentives based on the type of spend.
3. Provide contingency plans: Having a second (or third) credit card can help as a safety net if one of your credit cards goes over the limit or is temporarily deactivated.

Why isn't more always better?

• Overspending: Using multiple cards may sometimes lead to uncharacteristic spending, especially for those that struggle with staying on budget.
• Increased administrative burden: Managing multiple credit cards can negatively impact your credit health by missing payment deadlines as a result of managing due dates, annual fees, and keeping track of several monthly statements.
• Impact on credit score: Every time you apply for a credit card, your credit report is adversely affected because of the hard inquiry; multiple inquiries in a short time frame to lenders signals that you may be in financial distress.

Ideal number of credit cards

Everyone has a unique situation. For most, two to three cards well managed can supply a good balance of simplicity and benefits. You could always use the first card for rewards and a couple other necessities. Four to six cards may be okay for experienced users with good money management skills, and strict adherence to paying off all cards in full each month.

Jai Kumar, Co-Founder of TechFini, explained about the ideal number of credit cards a person should have, “The general recommendation is to have two to three credit cards if your goal is to build or maintain a good credit score. This number helps improve your credit mix, which lenders like to see, as it demonstrates your ability to manage different types of credit responsibly. Managing more than three credit cards can become difficult, increasing the risk of missed payments, fees, and a negative impact on your credit score.”

“Additionally, the number of cards you should have depends on your financial habits, organizational skills, and ability to pay balances in full each month. I also think the ideal number varies based on individual financial discipline and needs. More important than the exact number of cards is how responsibly you use them, timely payments, and keeping your credit utilization low are critical factors,” he added.

Choose cards that compliment each other

Rather than selecting cards randomly, try to curate a well-rounded portfolio. For example:

• One cashback card for everyday purchases.
• One travel card for hotel and flight reservations.
• One card for use abroad that has no foreign transaction fees.

In conclusion, it is more about appropriately using credit cards for management purposes or how many credit cards you own. Keep a record of your use, make timely payments, and watch your credit score. The biggest factor of control is financial discipline, not how many cards you own.

Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.