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How Many Credit Cards Should I Have - Coast Tradelines

Dec 19

How Much Credit Cards Should I Have? The Intersection of Credit Cards and Tradelines Explained


One of the most frequently asked questions in personal finance is "How much credit card do I require?" This question becomes much more relevant when you are considering the addition of trade lines to your credit profile. Let's take a look at this topic from a different angle giving you the insights and guideline to make informed financial decisions.

The Conundrum of Credit Card Numbers: Why It Matters

The number of credit card you use is not just a matter of personal convenience. It also affects your credit score. Although you're aware of the fact that having an account with a credit card will improve your credit score, you're probably not sure how many cards you should have.

The Pros and Cons of Owning Multiple Credit Cards

Before we look at how many credit cards you're supposed to have Let's first consider the benefits and downsides of owning multiple credit cards.

Advantages of Owning Multiple Credit Cards

  • If you've got multiple credit cards and credit limits, they could be greater. A higher credit limit can be useful for emergencies or large purchases.
  • Utilize credit cards that offer rewards and cashback program to cut costs when you buy items on a regular basis.
  • The ratio of your credit utilization will improve. Your credit utilization ratio refers to the percentage of your available credit that you are currently using. Utilizing multiple credit cards may boost your credit score by splitting your balances.

Disadvantages of Owning Multiple Credit Cards

  • Multiple credit cards could make it more likely to overspend and get into debt.
  • It's easy for people to make unplanned purchase that you cannot afford if you're using a variety of credit cards.
  • Managing multiple credit cards can take more time and effort. In particular, if the payments schedules are different.
  • The more cards you have can lead to the utilization of credit to be high. A high CUR can negatively impact your credit score.
  • Different cards have different benefits. Being too cautious with your cards can result in being left out of many advantages.
  • On the other hand having too many credit cards can make the process of keeping track of due dates challenging. It can result in high interest and a damaged credit score.

Key Points to Consider When Applying for Credit Cards

  1. Diversity of Benefits: Look for cards that have perks, such as cashback, travel rewards, or low-interest rates.
  2. Annual Fees It is important to make sure the card's benefits outweigh any annual fees.
  3. Interest Rates A lower APR is crucial unless you're confident that you'll settle the balance every month.
  4. Credit Limit: A higher credit limit can boost your credit utilization ratio, provided that you don't go over it.

Average Number Credit Cards Should I Have

Now that we've looked at the benefits and disadvantages of owning multiple credit cards let's explore the number of credit cards to get. What is too much, and how many are sufficient?

Financial experts suggest having 3 to five credit cards to create a comprehensive credit profile. This gives you a variety of benefits and helps with the ratio of credit utilization.

Factors to Consider When Deciding The Number Credit Cards to Own

A variety of factors should be considered when deciding on the number of credit cards to hold. These include:

  • Credit score and history Your credit score and past history determine the number of credit cards to have. You're only eligible to get one or two credit cards in the event that have an unsatisfactory credit score or a less than stellar credit history.
  • Earnings and expenses: Your earnings and expenses will be crucial. If you've got a high income and relatively low expenses, then you can manage more credit cards than someone with a lower income and more expenses.
  • Priorities and goals for your financial life Your goals in terms of finances and priorities can affect the number of credit card you should possess. If you're looking to boost your credit score, or earn rewards, you should consider having a variety of credit cards.

Recommended Number of Credit Cards Based on Different Scenarios

Here are some suggested numbers of credit cards that are based on a variety of scenarios:

  • For people with no credit history If you are not able to establish credit, you might qualify for one or two credit cards.
  • For people with a good credit score: If you have an average credit score, you might have a couple of credit cards.
  • For people with excellent credit scores: If you have excellent credit you can have four or more credit cards.

How Owning Multiple Credit Cards Affects Your Credit Score

After we've looked at how many credit cards you should have we can look into how using multiple credit cards affects your credit score.

Positive Impact of Owning Multiple Credit Cards on Credit Score

Owning multiple credit cards can have a positive effect on your credit score in a variety of ways which include:

  • Improved credit utilization ratio Possessing multiple credit card accounts can aid in improving your CUR. It spreads your balances over multiple cards.
  • Diversified credit mix: A diversified credit mix can help improve your credit score.

Negative Impact of Owning Multiple Credit Cards on Credit Score

Multiple credit card accounts can negatively impact your credit score the following ways:

    • Greater risk of not paying and delinquencies: having a large number of credit cards may result in greater risk of missing payments. There is also the chance of becoming delinquent on your accounts.
    • New credit inquiries and increased credit accounts: Applying for multiple credit cards could be the cause of multiple credit inquiry as well as new accounts. Both of these can affect your credit score.
    • Lower average account age A variety of credit cards can reduce the average age of your accounts. As a result, it could affect your credit score.
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