How Many Credit Cards Are Too Many?

If you’ve been reading our blog for a long time, you know how to build your credit, different ways to save money each month, how to make best use of your credit cards, and other great money saving tips.

Whether you have a credit card secured with some of your own funds, or just a regular card, making regular payments every month on time can help keep your credit moving in the right direction. Credit cards, when used in conjunction with self-control and self-discipline, can be very good for credit.

How to build your credit with credit cards

Credit cards provide you with the opportunity to prove you can make your payments every month, on time. There is also the possibility to pay down your card faster, by making larger payments than just the minimum. Doing this is going to improve your credit even more, providing all your other sources of credit are being taken care of as well.

The other way that credit cards can help you improve your credit, is by increasing the credit you have available. If you keep your usage down, more credit cards can help lower credit usage percentage. For example, let’s say you have a $5000 limit credit card, on which you’ve carried a $3000 balance for a while now. That is a credit utilization of 60% - not an ideal percentage. Now, let’s say you get approved for a second $5000-limit credit card and you don’t use it. Your usage is now $3000 of $10,000, which is just 30%. This is a much better usage percentage and near perfect for building your credit score.

I know what you’re thinking. I know you’re wondering why that doesn’t result in people applying for and being approved for more credit cards, to improve their credit usage percentage even more. Well, like anything, too much of a good thing could turn it into a bad thing. Moderation is key here. Too many credit cards can hurt you more than help.

How too many credit cards can hurt

While one more credit card could work to your benefit, too many credit cards can work against you. Here are some things to consider when you are thinking about applying for that extra credit card.

1. What applying for too many cards says about you.

Applying for too much credit in too short a time always raises red flags for future lenders. If you’ve applied for a lot of credit recently, and then you go looking for a mortgage or a loan, your lenders are going to look at your credit report and see what looks like a desperate person. Too many credit applications and credit checks is going to seem, to someone who doesn’t know you, like you’re desperately trying to get your hands on some money; perhaps to get yourself out of some financial trouble. For this reason, apply only for one credit card at a time and space it out with your next credit application of any kind by at least six months, if not a year.

2. Can you handle all that plastic?

You can also face a lot of difficulty having to maintain several credit cards. Remember, each card, as long as you carry a balance, requires a monthly minimum payment. Some cards charge an annual fee as well. Once you’ve got more than two or three cards to deal with each month, you might find yourself overwhelmed or unable to remember them all.

That’s more cards you have to monitor for identity theft; more cards you have to change your address for if you move. Imagine four credit cards with four different lenders when you’ve moved across town. That’s four phone calls, four instances of being on hold, four customer service reps potentially making a mistake. Who has time for that? What’s more likely to happen is that some of your cards will be neglected from time to time and your credit score will, once again, fall into disrepair.

3. Can you resist the urge to spend?

Finally, there is the temptation. Having tens of thousands of dollars at your fingertips, ready to spend as easily as just a mouse click or a tap on a machine, temptation is much harder to resist. If you’ve had trouble controlling your spending in your past, chances are, with that much credit, you will face daily temptations to overspend again. It’s one thing to say you’ve turned over a new leaf, and another to have actually done it. When it comes to credit cards, part of turning that new leaf over is knowing your own limits, weaknesses and vulnerabilities and protecting yourself from them. So do not fill your wallet with thousands of dollars of credit to spend. Limiting the credit you have access to is the smartest move.

4. Stay on top of your usage percentage

The amount of cards you have is not what lenders are looking for here, it’s about what you do with them. That’s why your usage percentage is an important statistic to stay on top of. Whether you have one, two or ten cards is not reflected in your usage percentage. What is, is how much of your available credit you’ve made use of. The best case scenario, is to have one or two modest credit cards that you could still make your payments on even if they were maxed out, and not use them very much. Just enough to show that you can use credit and pay it back with no hiccups, issues, or problems.

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Done with high credit card debt? Use a credit building program to build credit.

Of course, no one says you have to have a credit card at all to build credit. Credit cards usually mean a high interest rate, which, even without any fees, will make borrowing money expensive. Interested in a better way to build credit? As an alternative, in place of credit cards, you could get yourself on a credit building program from Refresh Financial and build your credit risk-free with ease. No credit cards required. No credit check required.

Like everything in life, credit, too, is best in moderation.