How many credit cards should you carry? There’s no right or wrong number. If you enjoy the thrill of chasing credit card rewards, you might be ready with a mix of cards to whip out for every occasion. If you don’t want the hassle of remembering when to use or pay off each card, you might instead opt for one excellent all-rounder.
According to Experian, the average American has around four credit cards. There are big differences in credit card ownership between generations and income levels. But if you’re wondering how many cards you need, your personal situation is far more important than what anyone else is doing.
Gen X and boomers have the most credit cards
As you get older, it is easier to build a credit history and qualify for credit cards. You have to be 18 to get your first credit card, so it isn’t surprising that Gen Z has the lowest number of cards by generation.
Income plays a part as well. Research from The Motley Fool Ascent shows that 43% of high-income Americans have three or more credit cards. In contrast, 62% of low-income Americans have one or no credit cards.
Experian data shows that credit card ownership peaks between ages 43 and 77, which fits with changes in income and lifestyle. The credit report company breaks down credit card ownership by generation as follows.
Knowing your magic credit card number
It is easy to compare yourself with other people and make decisions accordingly. But that only applies if the other person is in the same financial situation as you and is making the best financial decisions. Even then, we all have different habits.
If you are confident you’ll pay off your credit card balance every month, it can be beneficial to have at least one credit card. Making regular payments can help you to build a credit history, which will help your credit score. Outside of that, having multiple cards can be positive or negative in different scenarios.
Here’s how multiple credit cards can help you financially
The biggest advantage of having several credit cards is flexibility. Not only does it mean you have a back up if one card gets lost or stolen, but you can also mix and match rewards to get the most out of your spending.
You can earn more rewards
A common credit card strategy is to have one card that pays decent rewards on everyday spending, alongside one or more “specialty” cards. For example, you might combine a top cash back card that pays 5% on travel purchases with another that earns 1.5% on all your spending. If gas and groceries represent a big chunk of your budget, you might look for a card that pays higher rewards in these categories.
It can help your credit score
There are several factors that impact your credit score. One is something called credit utilization — the amount of your available credit that you’re using. If you’ve got one card with a limit of $5,000 and your balance is $2,500 your credit utilization ratio would be 50%.
The ideal scenario is to keep your credit utilization below 30%. Let’s say you got another credit card with a limit of $5,000, it would increase your total available credit to $10,000. Your credit utilization would then be 25%, which will improve your score. Just be aware that applying for new credit always dings your score a little.
Here’s how multiple credit cards can trip you up financially
Having multiple credit cards can give you access to serious amounts of money. Indeed, Experian says the average credit limit was almost $30,000 at the end of Q3, 2023. That’s a lot of high-interest debt.
You need to keep track of more cards
If you have multiple credit cards, it is important to stay on top of your payments and watch your spending. Average credit card interest rates are upward of 20% at the moment, so carrying any balance can be costly.
Similarly, a single missed payment can seriously hit your credit score. And it is easily done when you have several cards, all with different payment due dates. Consider setting up automatic payments so you don’t accidentally miss one.
Pay attention to credit card fees
There are some excellent no annual fee credit cards out there. But you’ll also find that the ones with the best perks often charge a fee. Weigh the annual fee against the value you’ll get from the card to decide if it’s worth paying. That calculation gets a bit more complicated if you’re using multiple cards.
Bottom line
Credit cards can help you earn hundreds of dollars in rewards. They can also cost you thousands of dollars in interest if you carry a balance. If having multiple cards means you’re likely to run up a higher balance, don’t open them. The interest costs will outweigh any benefits and credit card debt is hard to pay down.
But if you are confident you can play a bigger hand of cards to your advantage, it can be financially worthwhile. The trick is to be honest with yourself about your habits and finances so you can work out what is best for you.