There is no one-size-fits-all answer to this question, as the ideal number of credit cards varies depending on an individual’s financial situation and goals. However, as a general rule, it is a good idea to have two or three active credit card accounts, in addition to other types of credit such as student loans, an auto loan, or a mortgage. It’s important to remember that the number of credit cards you have is less important than how you use them. It is essential to be able to keep up with your existing monthly payments before considering a new credit card, as missing payments or carrying high balances can have a negative impact on your credit score.Â
Average Number of Credit Card Accounts by Generation
According to Experian, the average American has 3.84 credit cards. This number varies depending on age, with the youngest adult consumers (ages 18-25) having an average of two credit cards each, while the oldest generation (Silent Generation, born 1928-1945) has an average of 3.4 credit cards. Generation Z (born 1997-2011) has an average of 2.1 credit cards, while Millennials (born 1982-1996) have an average of 3.4 credit cards. Generation X (born 1965-1981) has the highest average number of credit cards, with 4.4 credit cards per person. Baby Boomers (born 1946-1964) have an average of 4.6 credit cards.
It’s worth noting that these are just averages, and the ideal number of credit cards for any individual will depend on their financial situation and goals. However, these numbers can serve as a general guideline for how many credit cards may be appropriate for different age groups.
Is it good to have multiple credit cards?
Having multiple credit cards can have both benefits and drawbacks. On the one hand, having multiple credit cards can offer financial flexibility and the ability to take advantage of a wider range of rewards and benefits. It can also be useful to have a backup credit card in case of an emergency or if one card is lost or stolen.
However, it’s important to carefully consider the potential risks and drawbacks of having multiple credit cards. These include:
- The temptation to overspend: It can be easier to rack up debt when you have multiple credit cards, especially if you are not disciplined about keeping track of your spending.
- Higher fees and interest rates: Some credit cards charge annual fees, balance transfer fees, or foreign transaction fees. Additionally, the interest rates on credit cards can be high, particularly if you carry a balance from month to month.
- Credit score impact: While having multiple credit cards can be beneficial for your credit score, it’s important to be mindful of how these cards are affecting your credit utilization ratio. This is a measure of how much of your available credit you are using at any given time, and it can have a significant impact on your credit score.
How having multiple credit cards can affect your credit score
As mentioned above, your credit utilization ratio is an important factor in determining your credit score. This ratio is calculated by dividing your total credit card balances by your total credit limits. For example, if you have a total credit limit of $10,000 across all of your credit cards and a total balance of $2,500, your credit utilization ratio is 25%.
As a general rule, it is best to keep your credit utilization ratio below 30%. This means that if you have a total credit limit of $10,000, you should aim to keep your total credit card balances below $3,000. If you have multiple credit cards, this can be easier to achieve, as you can spread your balances out over a larger number of cards.
However, it’s important to be mindful of the potential risks of having multiple credit cards, as mentioned above. If you are not careful, you may end up with high balances on multiple cards, which can have a negative impact on your credit score.
Does having too many credit cards hurt you?
Having too many credit cards can potentially hurt your credit score in a few different ways:
- Credit inquiries: Each time you apply for a new credit card, the credit card issuer will perform a “hard inquiry” on your credit report. This can temporarily lower your credit score by a few points. If you are applying for multiple credit cards in a short period of time, this can add up and have a more significant impact on your credit score.
- Financial management: It can be challenging to keep track of multiple credit cards and make sure that you are paying all of your bills on time. If you miss a payment or make a late payment on one of your credit cards, this can have a negative impact on your credit score.
How to manage multiple credit cards
If you decide to have multiple credit cards, it’s important to be disciplined about how you manage them. Here are a few tips to help you stay on top of your credit card balances and avoid potential pitfalls:
- Set a budget: It’s important to have a clear idea of how much you can afford to spend on your credit cards each month. This will help you avoid overspending and racking up unnecessary debt.
- Keep track of your balances: Make sure you are regularly checking your credit card balances and monitoring your spending. This will help you stay on top of your debts and avoid carrying large balances from month to month.
- Pay your bills on time: One of the most important things you can do to maintain a healthy credit score is to pay your bills on time. This includes making at least the minimum payment on each of your credit cards each month.
- Use your credit cards wisely: Avoid using your credit cards for unnecessary purchases or making large purchases that you can’t afford to pay off in full each month. Instead, use your credit cards for everyday expenses that you can pay off in full each month, such as groceries or gas.
- Consider consolidating your credit card debts: If you are struggling to keep track of multiple credit cards, you may want to consider consolidating your debts onto one card. This can make it easier to manage your debts and may also help you save money on interest charges.
FAQ
Is it bad to not use a credit card?
It is not necessarily bad to not use a credit card, but it can be beneficial to have at least one credit card that is active to establish a credit history and demonstrate creditworthiness to lenders. If you do not have a credit card and have not taken out any loans, it can be more difficult to get approved for credit in the future.
Is it better to pay off one card or pay down several?
It can be helpful to pay off one card at a time in order to avoid getting overwhelmed and to help you stay motivated. However, you should also consider the interest rates on your credit cards. If you have a card with a high interest rate, it may be more beneficial to pay that one off first.
Will two credit cards build faster credit than one?
Although having two credit cards won’t directly improve your credit score, it can provide an indirect boost by reducing your credit utilization ratio. Credit utilization is the amount you owe on your credit cards divided by your available credit. For example, if you have a total credit limit of $10,000 across all of your credit cards and a total balance of $2,500, your credit utilization ratio is 25%. As a general rule, it is best to keep your credit utilization ratio below 30%. This means that if you have a total credit limit of $10,000, you should aim to keep your total credit card balances below $3,000. Having multiple credit cards can help you achieve this, as you can spread your balances out over a larger number of cards.
Does canceling a card hurt credit?
Canceling a credit card can potentially have a negative impact on your credit score, but the extent of the impact will depend on a few factors. If you have a long history with the credit card and a high credit limit, canceling the card could reduce your overall credit limit and increase your credit utilization ratio, which could hurt your credit score. However, if you have a low credit limit and a short credit history with the card, canceling it may not have as much of an impact on your credit score.
