Credit cards are a great convenience, but can you have too many of them? Popular financial wisdom says an excess of plastic under your name will hurt your credit score. But just exactly, how many credit cards are "too many"?
- Having too many open credit lines, even if you're not using them, can hurt your credit score by making you look more risky to lenders.
- Having multiple active accounts also makes it more challenging to control spending and keep track of payment due dates.
- Closing older accounts can lower your average age of credit and hurt your score.
- You can boost your score in some cases by opening new credit cards if the new credit lines lower your overall credit utilization ratio.
How Credit Cards Affect Your Credit Score
Your credit score is calculated based on a number of factors:
- Payment history. This is the biggest single factor, accounting for 35% of your credit score. Although it takes all of your monthly debt payments into account, your credit card payments are key. Credit card companies are the least forgiving when payments are late and quick to report to credit bureaus when that happens.
- Debt-to-credit ratio. Also referred to as credit utilization, this ratio measures your outstanding debt in relation to your available credit—basically, how close you are to the credit limits on all of your cards and lines of credit. Your credit utilization counts for 30% of your credit score, and a ratio higher than 30% will hurt your score.
- Length of credit history. The longer you've had a particular credit account, the better. People with excellent credit scores have an average age of 11 years for all of their cards. This variable contributes to 15% of your overall score.
- New credit. Whenever you add a new credit account, it can cause your credit score to drop a few points—first when the creditor makes an inquiry on your credit report, then when the account is actually opened. New credit affects 10% of your score.
- Credit mix. The types of credit you have count for the remaining 10% of your score. Credit bureaus like to see how you manage debt across different types of credit accounts, such as credit cards, retail accounts, installment loans, auto loans, or a mortgage.
Adding too many new cards when you have a short credit history reduces the average age of your credit accounts, which can drag down your credit score.
How Many Cards Should You Carry?
As you can see from the list above, the number of credit cards you have and how you use them can have a direct impact on your credit score.
If you're a novice credit card user, it's smart to focus on building a credit history with one or two cards and paying off your balance in full each month. Adding credit cards for specific purposes, such as a good rewards program or better travel-related benefits, can also make sense, provided you add them gradually over time rather than all at once.
If you've used credit cards for several years and sometimes carry a balance, it may make sense to add a card if it has a significantly lower interest rate. You may also want to transfer a balance to a new card that offers a promotional 0% APR for new cardholders. However, you still need to focus on keeping your debt-to-credit ratio below 30%.
In general, it's often good to have a primary card that you use for most spending and maybe one or two as a back-ups or for specialized purposes (such as for a particular spending category that is rewarded with extra bonus points).
That's the average number of credit cards per U.S. consumer, according to the credit reporting agency Experian.
Dealing With Too Many Cards
If you think you may have too many cards or have some you no longer use, the worst thing you can do is start closing accounts without considering the impact on your credit score. Closing older credit cards can shorten your credit history, which can hurt your score.
Payment history on closed accounts eventually falls off your report, which can also hurt your score. Closing credit card accounts also reduces your amount of available credit, which can hurt your credit utilization ratio if you have outstanding balances.
It's better to leave your credit card accounts open and just put these cards on ice. If you get a warning about inactivity from the card issuer, use that card now and then to prevent the account from being closed. You can also keep that credit card as a backup, especially if it comes with a higher credit limit.
Another option for an older credit card you no longer use—and may have gotten when you were just starting out and didn't have many choices—is to ask the issuer about trading up to a better product, rather than closing the account outright.
What Is a Good Credit Score?
For credit scoring systems that use a scale of 300 to 850, such as most FICO scores, a good score is generally considered to be 670 and up.
What Is a Good Credit Utilization Ratio?
Generally speaking, lenders like to see a credit utilization ratio of 30% or less, and the lower the ratio, the better. That's one reason it may be a good idea to pay down your balances before applying for a mortgage or other major loan. Your credit score can have an impact on the interest rate you'll be offered.
How Can You Find Out Your Credit Score?
Some credit card companies will provide your credit score for free if you're a customer. You can also obtain it free of charge from a number of online sources.
The Bottom Line
Having a lot of credit cards can hurt your credit score under any of the following conditions:
- You are unable to keep up with your current debt.
- Your outstanding debt is more than 30% of your total available credit.
- You added too many cards in too short a time.
- You lack diversity in your credit accounts (i.e., you don't have other types of credit in your name like a mortgage, auto loan, etc.).
But don't simply start closing accounts just to reduce the number of cards you have. That can never help your credit score. Instead, pay off any outstanding balances and plan to at least hold on to the oldest card. Store it in a safe place other than your wallet. Then just use it once a year or so to keep it active and investigate options for trading it in for a better card with that issuer.