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Is it good to have multiple credit cards?

It can be tempting to apply for multiple credit cards because new credit card offers are constantly popping up. However, figuring out if you’re ready for multiple credit cards can be tricky.

Here are some common reasons why having multiple credit cards is a good idea.

Multiple credit cards could improve your credit score

There are many reasons why people have multiple credit cards. A common reason is to access additional credit to improve their credit score. A significant aspect of your credit score is the credit utilization ratio. Lenders will look at how much money you owe compared to much credit you have access to. Having multiple credit cards will give you access to more credit. If you keep your balance low, your credit utilization ratio will decrease and improve your overall credit score.

Lenders will also see that you have various credit cards on your credit report. This would suggest to them that you can keep up with multiple credit accounts, which would indicate you can be trusted with credit.

Having multiple credit cards will help you maximize your spending

Another benefit of multiple credit cards is the various rewards and perks based on your credit card and your spending habits. For example, you could have a credit card for the different rewards available. Some credit cards have good rewards for everyday spending (gas, groceries, etc.), while others have better travel rewards. So people will have multiple credit cards to maximize the rewards they can earn.

Having multiple credit cards at your disposal will give you more options for ensuring that every dollar you spend is optimized. This means your cash-back credit card could help you earn financial rewards for purchasing groceries like you usually would, while your travel rewards card is there to help you earn additional points so you can travel more.

Having multiple credit cards comes from taking advantage of sign up bonuses

Another popular reason to have multiple credit cards is the available promotions. When signing up for a new card, the provider will often offer a substantial sign-up bonus or a higher cashback earnings rate as an incentive. These promotions could be worth $250+, which is quite generous and difficult to turn down.

Many will end up with multiple credit cards due to taking advantage of these promotions.

How many credit cards are too many?

Like anything in life, you don’t want to overdo it. If you use your credit cards responsibly, you can technically never have too many credit cards. Using them responsibly means paying off your entire balance every month on time, so you avoid any interest charges. However, not everyone is meant to have multiple credit cards.

At the very least, you should have two credit cards. The reason for this is simple: if one credit card doesn’t work, you have a backup. Ideally, your two credit cards will be from two different issuers (e.g., a Visa or Mastercard). However, you should limit your credit cards to ensure that you can maximize the credit cards that you currently have without chasing rewards that may not be worth all that much.

Is it good to have multiple credit cards? Yes, but there’s a limit, as you don’t want to lose track of your payments and don’t want to hurt your credit score by applying for too many credit cards too frequently.

Potential issues with having multiple credit cards

Let’s be clear: if you’re able to off your credit card bills every month, there’s nothing wrong with having multiple credit cards. Of course, your definition of “multiple” may differ from others. Some people may think three is a lot, while others say 10 is too many.

Here are some of the potential issues with multiple credit cards:

  • Different billing cycles - Every credit card will come with different billing cycles, interest rates, perks, rewards, and so on. This could be a lot of information to keep track of if you’re not organized.
  • The impact on your credit score - Every time you apply for new credit, the lender makes a “hard inquiry,” which impacts your credit score slightly. If you have too many hard inquiries in a short period, you could be flagged by lenders since applying for so much credit could suggest that you’re spreading yourself too thin.
  • Credit card applications could hurt a major future purchase - It’s important to remember that those credit checks could hurt your credit score, which would then hurt your application if you’re applying for a home mortgage or looking to buy a new vehicle.
  • You end up chasing rewards that aren’t worth it - As tempting as it is to sign up for a credit card because of the rewards, you have to ask yourself if those rewards are worth it.

Before deciding if having multiple credit cards makes sense for you, you must be ready for the responsibility of adding another element to your finances. You’ll have one more credit card balance to consider when managing your money. If you’re currently struggling with your budgeting or spending, applying for a new credit card for the rewards won’t make sense.

If you decide that having multiple credit cards makes sense for you, please remember that this can be tricky if you don’t keep track of them. Store your cards securely and write down the anniversary dates of any that you don’t regularly use that also have an annual fee. By having a records system in place, you’ll avoid missed payments.

How often should you apply for a credit card?

While having multiple credit cards can help you improve your credit score, this doesn’t mean you should get carried away by applying for multiple credit cards every few months. This could also impact your credit score negatively.

When you apply for a new credit card or any kind of credit, the lender will perform a credit check on you to ensure that you can be trusted with having access to the credit. The lender requests a copy of your credit report from a consumer reporting agency, known as a “hard inquiry.”

We recommend you space out credit card applications by at least six months. Since every credit card application leads to a hard inquiry, your credit score gets hit by a few points, and you could also be misinterpreted as a credit risk. The good news is that the impact on your credit score is fairly small, and the results don’t stick around for long. You can easily offset the credit score ding by making your payments on time.

You should also not apply for new credit cards if you plan on making a major purchase in the near future. For example, if you’re considering applying for a home mortgage or an auto purchase, you will want to ensure that your credit score is pristine. You don’t want to feel the impact of too many credit card applications hurting your credit score when you need your credit to be at its best.

This is why we suggest only applying for a new credit card when it makes sense for your financial situation. It will sometimes require you to turn down that generous offer, no matter how tempting it is in the moment.

How having multiple credit cards impacts your credit score

As we discussed earlier, having multiple credit cards is likely an easy way to build up your credit score. Your score is a number that falls between 300 to 900. If your credit score is between 660 and 724, your score is considered good. A score between 725 and 759 is very good, while 760 or higher is considered excellent.

It doesn’t matter if your credit score is good, very good, or excellent. You likely won’t have a problem securing additional credit. However, someone with a credit score of around 660 may have a harder time getting approved for more credit cards than someone with a score of 800.

You might think that this implies that people with excellent credit scores have quite a few credit cards, but there are many other things that affect your credit score. That includes how much you owe, the length of your credit history, the types of credit you use, and even how often you apply for credit.

Here’s the exact breakdown of your credit score:

  • Payment history: 35%
  • Outstanding debt/credit utilization ratio: 30%
  • Length of credit history: 15%
  • Public records: 10%
  • Credit inquiries: 10%

Making your payments on time is the most important factor regarding your credit score. Your payment history is another significant value of your credit score, so if you intend on having multiple credit cards, it’s essential that you keep track of your payment cycles so that you always make your payments on time.

Your credit utilization is a significant portion of your credit score because it reflects how much money you owe compared to how much credit you have access to. Opening a new credit card and having multiple credit cards can help with this number because you’re hopefully increasing your overall credit limit without increasing your debt levels.

Your length of credit history is also vital because lenders want to see that you have a stable credit history. This doesn’t mean you should never close a credit card down, but you should think twice before switching credit cards. While applying for new credit cards will help you boost your credit utilization ratio, it’s difficult to beat the importance of building a payment history.

Credit inquiries account for 10% of your credit score. Remember, spacing out your credit card applications is crucial. Don’t hurt your credit score.

The bottom line: should I apply for new credit cards?

When figuring out how many credit cards are too many, you’ll want to be honest with your financial situation. If you can keep track of the billing cycles and feel that you’re optimizing your credit cards wisely, you can slowly consider adding new credit cards to your wallet. If you’re not financially prepared to have multiple credit cards, then you should stick to just one card or even think about not using a credit card until you are.

If there’s a legit reason for applying for a new card, such as you want to take advantage of a tremendous sign-up bonus or a backup card, that’s perfectly fine. You just don’t want to apply for a bunch of cards to chase rewards you don’t really need.

Having multiple credit cards can help you build your credit score up while allowing you to optimize your spending. We want you to ensure that you’re aware of the risks involved before adding another card to your life.

About the Author

Barry Choi

Barry Choi

Moneywise Contributor

Barry Choi is a Toronto-based personal finance and travel expert who makes frequent media appearances. When he's not educating people on how to be smarter with money, he's earning and burning miles and points for luxury travel.

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