How Many Credit Cards Is Too Many?

It’s a common notion to think having a lot of credit cards is going to be damaging to your finances. While overdoing it on the credit front can certainly end in a bad way, the calculus behind this is more complex than the number of cards in your wallet.

Does The Number Of Credit Cards I Have Affect My Credit?

The short answer to this is no, the number of credit cards you have doesn’t directly affect your credit. You could theoretically have 100 credit cards and have perfect credit. That would be a strange thing to do, but totally possible.

People with high credit scores, 785 and above, tend to have about seven credit cards. This is more than twice the number of the average U.S. consumer. So clearly, having too many cards isn’t the issue in itself.

What Aspects About Credit Are Most Important?

It’s possible for someone to get into far more trouble with one or two credit cards than someone with seven or eight. How can this be? It’s how you utilize your credit, not how many cards are in your wallet.

Your credit utilization ratio is one of the most important metrics credit reporting agencies use in determining your credit score. This is essentially the amount of credit you’re currently using versus the total amount allotted to you. For example, if you have purchases totaling $300 on your card and your credit limit is $1,000, then you have a 30% credit utilization ratio. Thirty percent is the recommended maximum and you should try not to exceed that number.

When you start pushing the limits of credit cards, or even maxing them out, it sends a message to credit reporting agencies that you’re likely in the midst of some financial trouble. Credit cards carry high interest rates, so you really want to be carrying as small of a balance month-to-month as possible.

The age of your  business credit history and your payment history are two other hugely important factors in the calculation of your credit score. If that person with 100 credit cards never misses a payment, and keeps their credit utilization below 30 percent, they’re probably going to have great credit. On the other hand, someone who got their first card two years ago and consistently doesn’t pay is going to have a much lower score.

What Happens When I Use Credit Cards Too Much?

As already mentioned, credit reporting agencies look at your utilization ratio to determine your credit worthiness. Using too much of your credit is going to send the message that you’re not being financially responsible — even if that’s not the case. But there can be far more dire outcomes from overusing credit than that.

High interest rates are the true dangers of credit cards. When you consistently carry a balance, you’re digging yourself a deeper hole month after month as interest charges pile up. People in this situation should consider credit card consolidation.

With this approach, your debts are rolled into one payment, typically at a lower interest rate than the collective rate of the previous debts. This lowers the interest burden on your debt, while also simplifying things because you now only have to pay one line of credit. This can be a really useful solution for people who took out too many credit cards and racked up debt on all of them.

What Are Alternatives To Credit Cards?

If you’re having trouble moderating your spending on credit cards, it could be a good idea to look for some alternative choices. Here are a few options you could consider instead of credit cards:

  • Debit cards: These are similar to credit cards in usage, except for the fact you can only spend money that’s in your checking account. You can’t go into debt with a debit card because you can only spend money you have right now.
  • PayPay, Venmo, CashApp: There are several smartphone apps that allow you to make many kinds of payment without having a credit card.
  • Digital wallets: Combining a variety of financial services into one place, digital wallets are gaining steam as the payment option of the future. While you can add credit card info into your digital wallet, it’s by no means necessary.

Credit cards can be great when used correctly. Some of them have really great benefits, such as cash back or airline miles. Having too many cards isn’t going to give you problems. Spending too much on those cards, however, can have some nasty consequences.

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