How Many Credit Cards Should I Have?

Multiple credit cards can improve your credit score and increase your annual rewards, but if you aren’t careful, the downsides could outweigh the benefits. Start with 1 or 2 cards to build up your credit rating, then swap for a premium card and only add others if they suit your needs and existing spending patterns.

Benefits of multiple credit cards

87% of Canadian credit cardholders say they’re in it for the rewards, but it’s equally important to consider the effect a new card will have on your credit score. After all, a good credit score can help you qualify for better insurance rates, employment, and housing – to say nothing of borrowing more money for less interest.

Let’s start with the advantages. Multiple credit cards can:

• Build credit faster: The more credit cards you pay off, the more positive data bolsters your payment history and credit rating.
• Improve your credit mix: Credit bureaus like to see timely payments, but they also want to know you can handle multiple types of credit, including credit cards, loans, and mortgages.
• Improve your credit utilization ratio (or debt-to-credit ratio): Spreading expenses across multiple cards – and keeping your balance below 30% of the limit of each card – is better for your credit score.
• Maximize payment acceptance: While Mastercard remains the only card accepted at Costco, nothing beats Visa when it comes to shopping internationally. As for the US, American Express is accepted at 99% of the checkouts down south.
• Maximize rewards: Because most credit cards only provide 1 - 2 high-rewards categories, shopping with multiple cards can help you make all your purchases count.
• Provide more perks and benefits: Airport lounge access, discounts, flexible financing, insurance coverage, roadside assistance, and more – extra goodies make it tempting to carry more than one card.

Downsides of multiple credit cards

Every credit card comes with its own fees, interest charges, payment due dates, grace periods, exclusions, and more to manage. And unless you’re pre-approved, applying for a new credit card usually incurs a hard credit check that temporarily lowers your credit score.

Multiple checks can significantly damage your credit score in the short term. Credit card issuers can also see who else has checked your credit rating and may reject your application if it seems like you’re trying to take on too much debt.

Consider waiting at least 3 to 6 months between applications. It gives your credit score time to recover, reduces your chances of rejection, and lets you evaluate your finances before proceeding.

Multiple credit cards can also:

• Damage your credit score with missed payments: Outstanding balances damage your credit score after 30 days. If you can’t pay it all, at least pay the minimum.
• Increase your debt with interest fees: The biggest reasons Canadians fall into credit card debt are interest fees. It’s crucial to stay on top of your debt by paying off your credit cards on time.
• Make you more vulnerable to fraud and identity theft: You’re less likely to spot fraudulent activity while managing multiple cards. Review each credit card statement carefully and use a different PIN or password for each card.
• Tempt you to spend more: Increased spending limits trigger the impulse to spend more. Make a budget and don’t change it just because you were approved for a new card.

3 steps to building your credit card portfolio

The key to successful credit card management is to do your research and apply with purpose. For example, if you add multiple rewards credit cards, make sure their rewards categories don’t overlap. If you add a business credit card, make sure it has the employee spending controls you need before you apply.

Here’s a 3-step process to building your credit history, maximizing rewards, and avoiding risks along the way:

1. Start with the basics

One or two cash back credit cards can start building your credit history and earn you rewards at the same time. Here are a few no fee credit cards for beginners:

2. Add a premium card once you qualify

With high annual fees and minimum income requirements, the eligibility requirements for premium credit cards are a turn-off for many. But if you have a sure grip on your finances and long for more valuable benefits, a premium card is the next step.

First, calculate whether the rewards you’ll earn will offset the annual fees. Next, consider replacing a basic card with the following:

3. Aim for rewards

Once you’re comfortably earning rewards and managing your spending on the basics, it’s time to consider niche products like balance transfer or low interest credit cards. Identify which spending categories and purchases eat up most of your money – and give you the most enjoyment.

If you’re drawing a blank, the creditcardGenius quiz has a scientifically calculated recommendation for every rewards category, including:

Can you have too many credit cards?

If multiple cards don’t appeal, look into increasing your credit card limits. It’s a safe way to increase your spending power on a card you’re already accustomed to.

While churning and burning credit cards for welcome bonuses appeals to some, the hobby demands organization. If you don’t pay attention to eligibility requirements, you’ll have incurred a hard credit check for nothing. Or you could miss the deadline for cancelling your card without paying an annual fee. Or you could fail to meet the minimum spending limits. Or…

Have you applied for multiple credit cards in the past, or do you know of someone who did? How do you manage them? Let us know in the comments below.

FAQ

How often should you apply for a new credit card?

To avoid unnecessary hits on your credit score, wait at least 3 - 6 months between credit applications and always check the eligibility requirements.

Will having multiple credit cards help my credit score?

Multiple credit cards can help you build your credit score faster, but only if you keep your debt-to-credit ratio under control and pay them off.

How many credit cards should I have as a student?

Because your expenses likely aren’t very high, it’s best to stick to a single student credit card while you get used to balancing your cash flow.

How many credit cards does the average person have?

There are a little over 200 credit cards per 100 people in Canada, which means the average Canadian has two or more cards in their wallet.