How Many Credit Cards Should You Have?

Almost everyone we know has a credit card. Maybe, we also have one or more credit cards. Actually, having and using a credit card is so common that it’s a major part of our financial life.

We use it for shopping or, sometimes, for investing. A credit card allows us to develop a good credit score if we use it properly. Above all, it helps us buy necessary stuff even when we’re running low on cash and have no other means to get hold of money.

But how many credit cards should you have? And how many credit cards are really necessary? 

By any chance, these aren’t easy or simple questions to answer. The number of credit cards anyone can have depends on a lot of factors, including your credit score, financial standing, savings, investments, lifestyle, location and lots more. 

After researching a lot, I have found some hard facts about how many credit cards you should have and why. Therefore, in this article, I will discuss these with you.

Let’s start by understanding what exactly credit cards are. That would help you understand what I am writing about and the number of credit cards you should have.

Credit Card Definition

Obviously, all of us are aware that a credit card is a plastic card that comes with 16 digits on the front with our name, issuer and brand, such as Visa, Mastercard, Discover, Amex, Diners Club or others.

That a credit card allows us to spend some money without the need to pay cash immediately. And we can pay in easy instalments whenever we get a credit card statement. But apart, a credit card is much more.

Pros of a Credit Card

A credit card is an agreement between the issuer and you. While the issuer agrees to offer you a credit worth a specific amount or limit, you agree to repay the money within a specific span of time.

Furthermore, a credit card is a symbol of your financial standing. That’s the reason Visa, Mastercard, American Express (Amex), Discover, Diners Club and others issue credit cards in variants such as Bronze, Silver, Gold, Platinum, Black, Premium, Privilege, Ultra and other such brand variants. The colour and type of credit card directly reflect your financial standing.

Additionally, a credit card is also a guarantee that you wouldn’t be short of cash worth a specific amount if you need to buy something. A credit card, therefore, is a security against being broke when you need money the most. However, this guarantee is available only when you spend within limits and repay all dues on time.

A credit card is also power. It gives you purchasing power that’s many times your monthly income, either from a job or business. That means you can buy a lot of things worth a specific amount of money that you would usually earn only over a period of months or even more than a year. It gives you the power to buy things that you would only dream about and that most people dream of owning even now.

Cons of a Credit Card

And surely, a credit card is also an invitation to a financial problem. When you spend without care or fail to repay dues on time, owning a credit card becomes a problem.

You will see a lot of charges known as the Annual Purchase Rate or APR being added to the due amount, and as months pass, the total amount to pay will increase very much. If you fail to pay over a specific period of time, the issuer of your credit card can take various steps to recover their money, which could also include court litigation.

Additionally, failure to pay can also send your credit score spiralling downwards rapidly. This means all future applications for credit cards, loans and mortgages or finances would be rejected by the bank or financial institution.

At places where it is possible to get a loan or mortgage with a poor credit score, you would end up paying much higher interest- up to 30 per cent on a personal loan. This means you would spend a lot more money on repaying the loan if you paid it back at all.

A credit card could take your household or family and you into deep financial problems. Before knowing, you would be paying twice or even thrice or more for something you bought using a credit card.

Not to forget, a credit card could destroy your mental peace, and unpaid dues can send you into stress, anxiety and also depression. That can severely harm your mental and physical health and that of your family.

As we can see from the above pros and cons, a credit card works both ways. It could work as a faithful friend that sits in your purse or pocket or become an archenemy that never stops biting away at your personal finances.

How Many Credit Cards Should You Have?

Since you’re now aware of the pros and cons of a credit card, let’s discuss how many credit cards you should have. Actually, this depends on your personal needs and financial standing, as I mentioned earlier. However, here’re some broad guidelines that you could consider.

1. Single Credit Card

For most people in the world and the US, a single credit card usually serves every purpose. Actually, we really don’t require as much credit as we believe. In fact, most credit card issuers will review and increase your spending limit every six months or maybe once a year. This depends upon your spending habits and repayment. 

If you are repaying on time and settling your bills in full, the issuing bank or financial institution will continue to raise your spending limit. This can be tempting for many people since they could go on a spending binge and buy stuff they don’t really require. Therefore, if you’re a prudent spender, a single credit card would be enough. A single credit card is also ideal for people that wish to use it only for emergencies.

Also Read: How To Use a Credit Card? 

2. Two or Three Credit Cards

On average, an earning American adult has two to three credit cards, according to reports from various sources. This is fair enough, provided you can afford them.

Generally, people hold two or more credit cards only when they need to buy a lot of things, and their income could run out quickly. Therefore, a credit card helps to bridge the gap between income and spending.

On the other hand, you can also have two or more credit cards if you’re looking for certain benefits. Some credit cards offer freebies such as discounted gasoline, discounts on shopping at specific stores, access to airline lounges at airports and so on. If you wish to take these freebies, it is fair enough to go for two or more credit cards.

However, there’s a huge danger in taking more than two credit cards. People tend to overspend or lose count of their spending. This could land you in financial problems. Also, your credit limits might not go up regularly, such as when you have a single credit card. Remember, two or more credit cards mean two or more monthly bills to pay. And higher APR too.

3. Three to Five Credit Cards

This can be a dangerous point. Owning three to five credit cards makes you prone to losing control over spending and repaying. It can cause you to lose overall control of your money. This happens because your credit card bills would arrive at different times of the month. Unless you have a sufficient bank balance, it could become impossible to repay even the minimum amount due.

Generally, three to five credit cards are only kept by persons that are in business and need to travel and entertain others frequently. They enjoy special privileges on each of these cards because of their high financial position and such people face no problems in repaying the whole amount when the bill arrives in their mailbox. Therefore, having three to five credit cards is something that everyone should try and avoid.

4. Physical and Digital Card

Nowadays, we also have situations where a person can have one physical credit card and a digital credit card. Having these two are perfectly fine because such persons usually use a physical credit card at stores and digital ones for online shopping. In such cases, the digital credit card can be taken with a lower spending limit that would usually be enough for online purchases only.

5. Cards of Various Brands

Next, we have persons that have credit cards from almost all brands. These include credit cards from Visa, Mastercard, Diners Club, Amex, Discover and others. Actually, these many credit cards aren’t really necessary.

Visa and Mastercard brand credit cards are accepted at millions of stores, both online and offline, around the world. However, if you wish to have one from Mastercard and the other from Visa, it is fair enough as long as you can repay both on time and avoid overspending.

6. More Than Three Cards

Now we have a scenario where some people truly feel the need for three or more credit cards. These are people that travel a lot around the world. Usually, they use one or two credit cards while in the US and others while abroad. This happens because it’s easier to track expenses while abroad and separate them from spendings back home.

In some countries, one brand of credit card is accepted more than the other. There’re also people who have a credit card issued abroad by a foreign bank. This is acceptable because such a credit card would usually be used mainly in the country where it is issued.

7. Cryptocurrency and Normal Credit Cards

Nowadays, there’s a newer trend in credit cards. You can get credit cards that are based on cryptocurrencies such as Bitcoin and Ethereum. They function like normal credit cards, meaning when you pay, the money will be debited in the form of Dollars or other currencies. However, the amount is deducted against the value of cryptocurrencies that you have in your credit card account. These are actually superb ways to pay.

A few people have cryptocurrency-based credit cards as well as normal credit cards. There’s no harm in having both. Because often, a rise in the prices of cryptocurrencies could mean that you bought that stuff almost free. The profits from your cryptos paid for that purchase.

However, most crypto-based credit cards are issued only against a specific value worth cryptocurrency. The minimum you need to get a cryptocurrency-based credit card is worth $250. This means you should have cryptos worth $250 to pay against your credit card.

8. Secured Credit Cards

Normally, a credit card is issued by the bank or other financial institutions depending on your credit score, income, location and other factors. However, there’s also one category of credit cards where all these considerations don’t really matter. And those are secured credit cards.

To get a secured credit card, you will require a fixed deposit at a bank. The bank puts a lien on your money and issues a credit card worth 80 per cent of the deposit. If you hold $1,000 on a fixed deposit, you can get a credit card with a spending limit of $800 and so on.

You can have as many secured credit cards as you like. That’s because the spending limit doesn’t go up. Instead, it remains only worth 80 per cent of the total fixed deposits you hold. And, if you fail to pay on schedule, the bank doesn’t take steps against you.

Instead, they simply take your money held on the fixed deposit as a settlement. These credit cards are ideal for people who want to use them only rarely or in emergencies, or for foreign travel. Unless you spend, the fixed deposit you hold continues to gather interest, which helps reduce the APR value that you would pay for purchases.

Wrap Up

On average, an American holds 2.5 credit cards, but let’s assume they hold three. These many cards are not really necessary unless you’re looking for a specific benefit. Instead, one or, at the most, two credit cards are enough for any ordinary citizen like us. Personally, I prefer holding only a single credit card because it is easy to manage. If I need more spending limits, it's easy. All I need to do is call or contact the bank. They review the spending limit and increase it where possible. You can also select whether you want a permanent higher limit or need it only for a short period.