How Many Credit Cards Should I Have?

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How many credit cards should I have is a question many people ask. Some people ask this when they have just one card while others wonder the same thing when they already hold multiple cards. 

There’s technically no wrong answer if you use your credit cards responsibly. However, if you apply for too many cards, you could quickly find yourself in a bit of trouble. The best way to approach the subject is to think about your goals so you can plan accordingly.

How many credit cards should I have

Have at least one credit card

The simple answer to how many credit cards should I have is at least one. By having one credit card, you’ll be able to build your credit score and make online purchases. It doesn’t really matter which credit card you have, but you should choose one that lines up with your spending.

For example, if you shop at many retailers that don’t take American Express, then you should apply for a Visa or Mastercard. You should also think about the rewards. Those who like travel should get one of the best travel rewards credit cards. If you rather keep things simple, go for a cash back credit card.

Even if you’re concerned about your spending habits, you should still get a credit card. You could request a lower limit to keep you in check. Alternatively, you could use a prepaid credit card such as KOHO, so you’re only spending what you have loaded. That said, keep in mind that KOHO doesn’t build your credit history unless you subscribe to their optional credit building service.

Two credit cards are better

Although you could easily get away with just having a single credit card, I think having two is a much better idea. Ideally, your cards will be from two different networks. That means you could have one card that’s American Express and the other a Mastercard. Having two different cards would allow you to use your credit card at just about every merchant. The second card could also serve as a backup, just in case your primary card isn’t working for any reason.

With two credit cards, you can really strategize when it comes to your spending. For example, my main credit card is my American Express Cobalt which I use when making grocery, restaurant, gas, and travel purchases. But when I’m shopping at a store that earns PC Optimum points or Costco, I use my PC Financial World Elite Mastercard since it allows me to earn points on every purchase.

When using multiple cards, you need to know exactly what the earn rates and benefits are so you can maximize your rewards. This should be obvious, but you should always be paying with the credit card that earns you the most points/cash back at any given merchant.

Three or more is if you have a goal

Three credit cards may seem extreme to some people, but it’s more normal than you think. Some people like having one of each type of card. Others have multiple credit cards just for some of the included benefits such as travel insurance, lounge access, and roadside assistance. If the benefits you’re getting are worth more than the annual fee that you’re paying, does it really matter how many cards you have?

I personally think that if you’re going to carry multiple cards, you need to have a goal in mind. For me, I focus on travel rewards and use credit cards to get free flights. By applying for American Express Aeroplan Cards, TD Aeroplan cards, and CIBC Aeroplan cards, I can quickly rack up points. Since all of these are co-branded cards, all the points end up in my personal Aeroplan card. 

Some people make the mistake of applying for as many cards as possible, but then they’re left with a bunch of points with various programs and a lower credit score.

The benefits of having multiple credit cards

There are a lot of benefits when you have multiple credit cards, how much you value them is a personal decision. Here are some of the reasons why you would want to have more than one card.

Payment options – As mentioned, having two different types of credit cards is handy as not every merchant accepts every type of card. Also, there are times where your main credit card may not work. Having a secondary card is essentially a backup so you always have a way to pay.

Free additional benefits – Applying for no fee cards just to take advantage of the free benefits is a smart strategy. The Triangle World Elite Mastercard gives you free roadside assistance which typically costs $120 a year. Then there’s the Home Trust Preferred Visa that doesn’t charge foreign transaction fees. Most credit cards charge a 2.5% foreign transaction fee, so you save every time you make a purchase in a foreign currency with the Home Trust card.

Potentially improved credit score – I’ll get into the fine details about credit scores further down, but having multiple credit cards may actually improve your credit score. One major factor that determines your credit score is your credit utilization ratio. That’s the amount of credit you’re using relative to what you have access to. Assuming you’re not maxing out your cards, your utilization ratio could be low since you have a few cards.

Maximizing rewards – Every credit card has a different earn rate, so when you hold multiple ones, you can maximize your rewards. For example, the Scotia Momentum Visa Infinite earns you 4% cash back on groceries and recurring bill payments. 2% on gas and transit purchases. And, 1% on all other purchases. Pair that with a Tangerine Money-Back Card which gives you 2% cash back on up to 3 categories of your choice and has no annual fee, and you’re laughing. You’d easily have almost every merchant category earning you at least 2% cash back.

Scotia-Momentum-VISA-Infinite
  • $120 annual fee – first year free
  • 4% cash back on groceries and recurring bill payments
  • 2% cash back on gas and transit
  • 1% cash back on all other purchases

The cons of having multiple credit cards

I know that I’ve made it sound like having multiple credit cards is a great idea, but the reality is that for some people it could be a terrible idea. Here are some of the cons to consider when you have too many credit cards.

It could lower your credit score – If you’re maxing out your cards, you could have a high credit utilization ratio which would negatively affect your credit score. Also, if you’re constantly applying for and cancelling credit cards, your credit score could take a dip since you’re always looking for new credit.

You could go into debt – The reality is that some people don’t have complete control over their spending. Having multiple credit cards means you’ll have access to more credit. If you’re not responsible with your spending, you could quickly get into a lot of debt.

More things to manage – When you have one or two cards, managing your bills are relatively easy, but once you have 3 or more, you really need to stay on top of things. If you’re using different cards to maximize your rewards, you need to remember which one to use at specific merchants, and you need to remember to pay off all your bills each month. For some people, the hassle of juggling different billing cycles isn’t worth it.

Annual fees add up – In an ideal world, you won’t be paying credit card annual fees, but most cards that come with good benefits do have a yearly charge. You can likely find a few good cards with no fees, but as you add more cards to your wallet, your annual fees will likely increase too.

How having multiple credit cards affect your credit score

Whenever you apply for a new credit card, your credit score takes a hit of 10 points. Although that’s technically a negative, in the grand scheme of things it likely doesn’t matter since your credit score will go up after a few months of making payments.

As a refresher, your credit score is a number between 300 and 900. The higher your credit score, the more creditworthy you are in the eyes of the lenders. Let’s say you have a credit score of 850 and you applied for a new card. Your credit score would drop to 840. Do you think a lender would care? Probably not as your credit score would still be considered very good. Now, if you had a score in the 600s, you may want to think twice before applying for a new card.

Remember, your credit utilization ratio is also factored into your credit score. If you’re not maxing out your cards, you’ll have a lower utilization ratio which will likely improve your credit score. As long as you’re responsible with your cards, your credit score shouldn’t be affected too much.

Final thoughts

When people ask me how many credit cards should I have, I typically recommend three. As you’ve learned, I favour this number for diversification and it’s an easy way to earn a lot of points. Plus, three cards are still relatively easy to manage.

How Many Credit Cards Should I Have?

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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