How Many Credit Cards Should You Have?

This post comes from Matt Carstens, who writes about personal finance and credit cards daily on Creditnet.

We recently received this question from a Money Talks News reader:

I’m a few years out of college and thinking about applying for another credit card. I’m employed full time, I’m debt-free and I have always used my credit card responsibly, paying it off every month. I worry, though, that since I only have one credit card (that I got from my bank when I was in high school) I won’t have enough credit history down the road. Should I apply for another one? If so, how many? – Leslie K.

My response

It seems I’m asked this question every week: “How many credit cards should I have?” It’s also one I’ve asked myself in the past.

I was in a very similar situation coming out of college. I had a credit card from my bank with a $1,500 credit limit that I used for things like gas and groceries and always paid off. I too wondered at the time if I needed another credit card.

Well, the simple answer is no. The more complicated answer? It’s up to you.

There is no magic number of credit cards one needs to utilize to boost your credit score. That three-digit number is much more dependent on you utilizing what credit you have responsibly, rather than how much credit you have access to.

The benefits of having more than one card

That being said, there can be benefits to adding lines of credit.

Leslie says she is a responsible credit user. My advice would be to make sure you’re comfortable handling the amount of credit you have, then shop around for a credit card that would work best for you, say, one with cash back or other rewards.

Part of the calculation of your credit scores is your credit utilization ratio. This basically compares how much debt you owe against how much available credit you have access to. It’s one of the factors of “amounts owed,” which makes up 30 percent of your FICO score, myFICO says. If you’re comfortable doing so, adding another card to the mix increases your available credit. Just make sure your spending doesn’t increase as well.

Another super-important benefit of multiple cards, especially when traveling, is having a fallback in case something goes wrong, like loss, theft or fraud.

What kind of card to get?

If you’re a responsible credit card user, this is where the fun of shopping for a new card comes in.

Like to travel? Try a card that gives you rewards that you can exchange for airfare, hotels or car rentals. Big football fan? Take a look at an NFL- or college-themed card that gets you discounts on tickets or your favorite team’s gear. Or maybe you’re just looking to get some cold, hard cash back. Some cards offer as much as 6 percent cash back on rotating categories including gas, groceries, restaurants, electronics and more.

In conclusion

Remember, it’s very important to use credit responsibly. Never make a late payment, and limit your credit card spending to no more than 30 percent of your available credit. Also, always pay in full every month. That’s not essential to a good credit score, but it will keep you from racking up a large balance — which can be detrimental to your credit scores – and paying interest on the debt. Charge only what you can afford to pay each month.

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Comments & discussion

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  • Russel Brooks

    I recommend at least 2 cards, one for use in day to day shopping where you hand over your card to pay for stuff and the other for repeated shopping with select companies (like amazon, netflix, monthly subscriptions, cell phone bill, etc). The logic is that those select companies are (hopefully) going to be careful with the card so its chances of theft are lower; the bills are going to be paid automatically with the card info in your account on their service, there isn’t any human interaction every time the card is used. The other card may get copied and attract fraud as it is used by a human every time you pay for something. In that case you’ll have to report it to the credit card company and they’ll issue you a new card. You don’t want any of your repeated purchase companies on that card because you’ll have to go to each of them to get the card info updated. After 3 fraud episodes I discovered how much of a pain this is and I moved to our 2 card system which is much easier to recover from. I only carry the card for day to day shopping with me. The other one stays in the safe at home as it’s only needed when I sign up for some new repeating service.

  • Patricia Burgess

    I tried to get a second credit card and was denied because I only had one credit card. Does this make sense to YOU??? How can I get a second credit card if I am denied one? “Nice Catch 22″