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 of the best 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 appealing.

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.

Have at least two credit cards

As a general rule, having at least two credit cards is ideal. Designate one as your primary card and the other as your backup card.

Ideally, you want your backup card from a different credit card network. For example, if your primary credit card is an American Express, having a Visa or Mastercard as your secondary card is ideal. Some people will even get one from all three, so they’re covered if a retailer only accepts one type of card.

When you should only have one credit card

Although having multiple credit cards clearly has its advantages, there’s nothing wrong with having a single credit card. That said, if you’re going to carry only one credit card, you’ll want to make sure it’s the right one.

Ideally, you want to choose a credit card that lines up with your spending or goals. So pick between travel rewards or cash back. You’ll then want to determine if you’re going to pay an annual fee or not. Generally speaking, credit cards with an annual fee come with better benefits.

Anyone who’s worried about controlling their spending should also only have one credit account open. Even if you’re not charging much or anything at all to your card, you’ll still be able to build your credit score. If keeping the credit card could still tempt you to spend, just put it in a box at home so it’s out of sight and out of mind.

Maximize your rewards

For many people, the case for having multiple credit cards comes down to maximizing the rewards you can earn. Many credit cards offer an increased earn rate on specific categories such as groceries, gas, streaming services, and travel. However, no single credit card gives you a high earn rate for every category. That’s why some people prefer to have multiple credit cards.

For example, the American Express Cobalt Card gives you five points per dollar spent on food and drinks, which includes restaurants and grocery stores. Then there’s the Scotia Momentum Visa Infinite Card that gives you 4% cash back on recurring bills and 2% on transit purchases. Finally, you could round that up with the Tangerine Money-Back Credit Card that gives you 2% cash back in up to three categories of your choice.

That combination of credit cards could easily help you maximize your return in quite a few merchant categories. Plus, you’d have one card from every network.

Get multiple credit cards for specific needs

Another reason you might consider getting multiple credit cards is for the specific benefits that they offer. For example, the Triangle World Elite Mastercard has no annual fee and comes with a Roadside Assistance Gold Plan. If you were to purchase a roadside assistance plan, it would cost you about $100 a year, but it’s free with some credit cards.

Another example is the Wealthsimple Cash Card. It has no foreign transaction fees on purchases and ATM withdrawals. Most credit cards charge a 2.5% fee when you make a purchase in any currency that’s not Canadian dollars. If you were to use your debit card at a foreign ATM, your financial institution may charge you up to a 3.5% fee. With the Wealthsimple Cash Card, you avoid those fees. Plus, this is a prepaid credit card, so there’s no hit to your credit score if you apply.

You should also consider where you shop and if they offer a credit card. For example, if you regularly buy your groceries at Loblaws-owned stores, you could apply for a PC Financial Mastercard, since it allows you to earn PC Optimum points on every purchase. Those points could later be used to redeem free groceries and merchandise.

Potential issues with having multiple credit cards

Let’s be clear: if you’re able to pay 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 too many, while others say 10 is just fine, but probably enough.

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 due to multiple hard inquiries.

We recommend you space out credit card applications by at least six months to lessen the impact of multiple credit checks. The good news is that the impact on your credit score is fairly small (five to 10 points for each hard iniquiry), and the impact doesn'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 mortgage or a car loan, you will want to ensure that your credit score is as pristine as possible. 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.

How having multiple credit cards impacts your credit score

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.

Make sure you manage your cards well

Regardless of how many credit cards you get, managing them is the most important thing. By paying your bills on time, you’ll keep your credit score in good standing.

If you find that keeping track of multiple due dates is difficult, you could set up automatic payments via your online banking portal. Or you could call your credit card providers and ask them to adjust the billing cycle, so they all end on the same date.

And if you’re struggling to keep those credit cards paid, it’s time to look at making a budget.

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

When figuring out how many credit cards are too many, you need to be honest with yourself about 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 legitimate reason for applying for a new card, such as you want to take advantage of a tremendous sign-up bonus or to have 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.

More: Best credit cards for Quebec residents

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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