How Many Credit Cards Should You Own?
You may be the type of person who has one credit card, sees no use in having another, and routinely throws away credit card offer after credit card offer. Or you may be the type of person who has a dozen credit cards in your wallet and is thinking about applying for even more cards. So what’s the happy medium? How many credit cards should you really own?
Some people think that the number of credit cards in your name affects your credit score—that it’s impssible for a person to have a great credit score with just one lonely credit card. However, that’s not true. It’s not about the quantity of credit cards—it’s about the quality of your credit. This means that you can have an excellent credit score with just one card if you pay all your bills on time, if you keep the balances on your card or cards low, and if you sparingly take on new credit obligations. That’s right, all you credit card hoarders—you actually shouldn’t be apply for every single credit card that you get an offer for.
However, on the other hand, having more than one credit card can help your credit score by making it easier for you to keep your debt utilization ratio low. What’s a debt utilization ratio, you may ask. Let’s use this simple example. Say you have one credit card with a credit limit of $1,000, and you charge an average of $900 per month to that card. This is a debt utilization of 90%. If you had more than one credit card to spread that amount out on, then you’d be able to keep your debt utilization low, which can help improve your credit score.
Where do you stand on the debate? Do you think it’s best to have multiple credit cards or to just stick to one or two?