How Many Credit Cards Should I Have? Your Questions, Answered

Rohan Peterson for Badlands

The average American has three to four credit cards, but is that really ideal? How many credit cards should you have? Simple answer: It depends on the person. It's not so much a matter of credit score, but lifestyle. For a financially responsible person with a strong credit score and a moderate to high income, more credit cards is often the way to go.

However, for someone who struggles with managing credit, fewer is better. In other words, if you find yourself irresistibly drawn to the temptations of the late-night infomercial, you might want to keep your credit limit on the lower side. Of course, there are some more complicated variables we have to look at, like debt-to-credit ratio. Credit can be a confusing topic, but we'll try to break it down in the simplest way possible.

Keep reading to learn the pros and cons of having more credit cards.

How Do Credit Cards Affect Credit Score?

It might surprise you to learn that the number of credit cards in your wallet actually makes up a very small percentage of your credit score. For example, only 10% of a person's FICO score is based on the type of credit used, and the number of credit cards is just one factor of that 10%. In other words, signing up for a new Visa card is unlikely to boost your credit score in any significant way-at least, not immediately.

When it comes to credit score, the most important factors are payment history and debt owed. By keeping outstanding debt to a minimum and making all payments on time, you can keep your credit score in excellent condition whether you have nine credit cards or two.

Granted, research from Credit Karma has found a correlation between more credit cards and higher credit, but as they used to say in statistics class, correlation doesn't necessarily equal causation. People with good credit have an easier time securing new lines of credit, so it stands to reason that people with more credit cards would have high scores.

Debt-to-Credit Ratio

Of course, there is one significant way in which more credit cards can boost your credit score over time: debt-to-credit ratio. To put it simply, more credit cards means a higher overall credit limit. By raising your credit limit, you decrease your debt-to-credit ratio: less debt, more credit. Of course, this math doesn't work if you use the new cards to pile on new debts, so be mindful of your spending. The best approach is to pay off your existing credit card debt each month. Don't let it accumulate.

It's also worth noting that there are other ways to raise your debt-to-credit ratio without acquiring new credit cards. For instance, you can contact your existing credit card company and inquire about having your credit limit increased. This would have roughly the same effect, but it might not be an option if your credit card company is unwilling to raise your limit.

The Pros and Cons of More Credit Cards

With more credit cards, you can spread your debt rather than piling it onto one card. This offers additional lifelines and can protect your credit score. In addition, more credit cards means greater access to the rewards and perks offered by different credit card companies, such as cash-back rewards. Finally, you never know when a particular card won't be accepted, so it's a good idea to have multiple options on hand.

Of course, there are also drawbacks to having excess credit cards. If you open up several new accounts within a short span of time, it can reduce the average age of your credit history and negatively impact your credit score. If you do opt for multiple cards, spread them out. Don't open them all at once. Also, it can be a hassle to juggle numerous credit cards, especially if you have to constantly use them to avoid cancellation due to inactivity.

So in short, opt for the number of credit cards that suits your needs. Three to four are ideal for most Americans, but consider your financial goals to make the choice that works for you.

If you're already struggling with the number of cards you have, see our tips on how to consolidate credit card debt.