How many credit cards should you have?

You’re already familiar with the benefits of having a credit card, such as convenient purchasing power and the ability to strengthen your credit history. But did you know you may be able to stretch these advantages across multiple cards?

Spreading your purchases across multiple cards may give you access to different kinds of rewards and help build your credit history. However, as with all credit cards, it’s important to know your limits and avoid spending more than you can afford. Let’s look at the pros and cons of carrying multiple credit cards so you can determine the right amount for you.

There’s no magic number for how many credit cards you should have. Everyone’s financial situation is different. Someone just beginning to build their credit history may want to stick with just one card, while someone with a long history of creditworthiness may be ready to take on multiple cards.

Whether it’s good or bad for you to have multiple credit cards depends on your ability to manage credit, your financial goals and your credit history.

Holding multiple credit cards can come with a wide range of perks, including helping build support for your financial future.

Maximize rewards

Many credit cards provide rewards, like points or cash back, just for using the card. How many rewards you can earn and on what types of purchases can vary widely.

If you have one card that offers a high rewards rate for travel purchases and another that offers high rewards for grocery purchases, using multiple cards to maximize your rewards may be beneficial compared to using only one card.

Improve your credit score

Using multiple cards may actually help build your creditworthiness.

One of the factors credit reporting agencies use to determine your credit score is your debt-to-credit ratio, also known as your credit utilization rate. This means how much debt you have compared to your total amount of credit available. Reporting agencies like to see you use as little of your available credit as possible.^ⓘ

Having multiple credit cards and keeping your balances low may show a good credit utilization rate.

For example, if you have one card with a credit limit of $1,000 and you owe $500, your credit utilization rate is 50%. But, if you add another card that has a $1,000 limit and don't use it, your credit utilization rate is now 25% ($500/$2,000=25%).

Keep your budget in check

Spreading out your purchases and bills over multiple cards may help you visualize your budget. For example, you could put some recurring payments like utility bills or streaming subscriptions onto one card, giving you an easy way to see exactly how much your regular monthly expenses are.

If you run a small business, you may choose one card to use exclusively for business expenses. Keeping your professional and personal finances separate may save you the hassle of sorting through your credit card statements at tax time.

Pay for an emergency

Designating an extra card as a backup may ensure you still have access to credit in an emergency. If your main card is lost or stolen, you can use the additional card to cover expenses while you wait for a replacement. If there’s a medical emergency or car accident, having an extra card without a lot of debt on it can be useful to help pay for urgent care or repairs.

If you’re travelling, having multiple cards from different providers can be useful in case a card is denied or a retailer doesn’t accept a certain kind of card. You might also leave your emergency card in a safe place in your hotel room in case your main card is lost or stolen, ensuring you’re not left scrambling while in an unfamiliar location. Learn more about what to do if your credit card is lost or stolen.

While using multiple credit cards may have its benefits, there are some drawbacks to keep in mind.

Overspending

Having more credit cards means you have more credit available to you to make purchases. This can be great if you’re looking to make a big purchase, but you may be tempted to spend more than you might have otherwise. Being able to buy more isn’t the same as being able to afford it, and you might quickly find yourself overwhelmed with debt.

Pricey annual fees

Some cards, particularly those with upscale perks or rewards, may have higher annual fees.^ⓘ When considering opening a new card, make sure to factor these fees into your budget. 

Managing bills and interest rates

More cards mean more bills to keep track of with different due dates, meaning you need to make sure you know when to make a payment to avoid penalties. Interest rates may also differ between cards. If you don’t pay attention, you might wind up paying more interest on a purchase than you thought.

There’s no set time you need to wait between credit card applications, but opening too many accounts in a short period of time may affect your credit score.

When you apply for a credit card, the lender performs what’s known as a “hard credit inquiry.” Each hard inquiry may impact your credit score and many in a short period of time may do more harm than just one.^ⓘ 

Before applying for a new credit card, ask yourself what it offers that you’re not already getting with your current ones. If you recently got a new credit card, you may want to take a few months to get used to managing your account and making on-time payments before applying for more credit.

Having multiple credit cards isn’t necessarily good or bad. Opening an additional account can give you some financial breathing room and build rewards if the card offers them, but it also requires responsibility to juggle multiple cards. Keeping these factors in mind can help you make the right choice for your financial needs.

We offer several types of credit cards, including those with cash back and travel rewards programs. Find the cards that best fit your needs by using the credit card selector tool. If you have questions about CIBC credit cards or need further help choosing one, contact us Opens a new window..

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