How Many Credit Cards Should You Have?

Are there multiple credit card accounts under your name? Or do you only use one card for everything?

There is no right or wrong answer to this question, as it depends on your personal finances and spending style. However, before you take out more credit cards, ensure you know the benefits and drawbacks. Here is everything you need to know about having multiple credit cards.

Benefits of Multiple Credit Cards

Using more than one credit card can be beneficial. Next time you wonder, “Is 5 credit cards too many”, remember these advantages:

• Credit cards can help with building your credit score. As long as you are paying back what you spend, using different credit cards shows you are a responsible borrower.
• You can benefit from different card loyalty schemes and gifts. Some credit cards offer travel miles and others offer cashback discounts. Using different cards unlocks different benefits.
• Access to credit in emergency situations. If an unexpected bill appears, you can have more flexibility to cover it.

Drawbacks of Multiple Credit Cards

While you can have multiple credit cards and good credit, using multiple cards is not right for everyone. Here are some noteworthy drawbacks of credit cards:

• There is a higher chance of missed payments and credit card debt. With more accounts to manage, you are more likely to accidentally fall behind on your payments. If you fall behind on your payments, you will likely have to pay more interest. Not ideal!
• Higher annual fees. Some credit cards require annual payments. You will pay more than one fee if you use more than one fee charging card.
• Negative credit score impact. Your credit score will decrease if you don’t make your payments on time and rack up debt. This means you may have difficulty getting a mortgage, obtaining a personal loan, securing car finance or borrowing money.
• Temptation to overspend. Having multiple credit cards at your disposal might tempt you to break your budget and make impulse purchases. This could lead to long-term unhealthy spending habits.
• Higher credit line utilisation ratio. Lenders like to see that you only use 30% of available credit. Having more than one credit card may cause you to use more than 30% on at least one of your accounts.

Managing Multiple Credit Cards

If you are using multiple credit cards, make sure you are managing them sensibly.

Make sure you are keeping your payments organised. Take note of each card’s payment dates, interest rates and credit limits. Review each account weekly to guarantee you don’t forget to make a payment. Set reminders in your calendar or on your phone to help yourself stick to this schedule.

Always make at least the minimum payment on each card. Checking in monthly may lead to you missing the required minimum, and then you will have high fees to tackle. When paying credit cards off, you should always put the card with the highest interest rate first.

Learn more about credit cards here.

How Many Credit Cards Should You Have? The Takeaway

Having credit cards can feel empowering. But you must be responsible with your usage. Never borrow more than you can afford to repay, or you may experience financial difficulties. When in doubt, consult expert financial advice for assistance.

More Information

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Can I pay more than the minimum payment?

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Or visit the Polar Credit Info Hub to continue learning about personal finance, loans and credit alternatives.