You may be wondering if you have too many or too few credit cards. Is there a perfect number of credit cards you should have, and how will that number affect your credit score?
The truth is, there is no magical number of credit cards that you should have. What matters most is how you manage them.
To maintain an excellent credit score, you should pay your all credit card bills on time, whether you have 1 or 10 credit cards, since paying on time makes up 35% of your FICO score or credit score.
Another factor to consider is your debt-to-credit-limit ratio since that makes up 30% of your FICO score.
If you tend to hold balances on your credit card, having only one or two credit cards may affect your debt-to-credit-limit ratio negatively, and thus your credit score.
The "debt-to-credit-limit ratio" is the money you owe in credit card expenses divided by your total credit limit. For example, if you have one credit card with a $2000 credit limit and you spend $1000 on your credit card, your debt-to-credit-limit ratio would be 50% (1000/2000) but if you had a second credit card with a $2000 credit limit, your debt-to-credit-limit ratio would be 25% (1000/4000). The lower the percentage, the better it is for your credit score.
The number of credit cards you should have also depends of course on your individual needs. For example, if you are someone who wants to earn rewards on your everyday spending, you may want to get at least one rewards credit card.
If you own a business, you will most likely need at least one business credit card and at least another credit card for your personal expenses.
In my opinion, I would say that the optimal number of credit cards you should have in order to maintain a good credit score is between 3 and 5 credit cards because any more than that could affect your credit score negatively if you don't pay off your bills on time.
On the other hand, having fewer than 3-5 credit cards could negatively impact your debt-to-credit-limit ratio if you tend to hold balances and therefore your credit score.
It's good to have a few credit cards to meet your different needs and to have backup cards in case one of them gets stolen or is lost. Another thing to keep in mind is that if you have an American Express card, you should also get either a Visa or MasterCard to ensure that at least one of your cards is accepted everywhere. If you're traveling try to have both a Visa and MasterCard, you never know when only one or the other might be accepted.
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