Editorial Policy

How many credit cards should I have?

Eva Norlyk Smith Ph.D.

May 19, 2014

QDear Eva,

My mom says one credit card is enough. But I thought I had read that you should have three and even four. What is the right number, and what is the reasoning for how many you should have? — Jimmy

AHi Jimmy,

It depends on your goals. If you simply like to have the convenience of a credit card for purchases and online shopping, then one credit card is plenty. If your goal is to build an excellent credit score, then you're right, it is better to have more than one credit card, ideally around three to four credit cards.Ask Eva

It may seem counterintuitive that having multiple credit cards would help improve your score, but it does. It helps your credit mix, which accounts for 10 percent of FICO scores. It also helps build your payment history, which accounts for a whopping 35 percent of scores. Having multiple cards that you pay by the deadline over an extended period of time demonstrates you are responsible enough to manage several credit card accounts at a time.

And, finally, having multiple credit cards helps your credit utilization score, which makes up 30 percent of scores. When you have a larger line of credit available, the ratio of debt to credit will be lower, as long as you keep your balances low.

That means 75 percent of the FICO scoring model rewards you for having multiple credit cards. However, you don't want to apply for credit too often; it's better to build your portfolio gradually, adding one to two cards a year.

That said, there is the question of whether you have sufficient practice with managing credit to take on more credit cards. Indeed, your mom may be hinting that you don't have enough experience or discipline yet to handle more than one card.

If you don't manage your credit card well — by not paying bills on time or running high balances — it's a different story. That would not only damage your credit, it would saddle you with high-interest credit card debt you're unable to pay off.

How will you know if you're ready for more than one credit card? If you spend more on your credit card each month than you can pay off, then your mom is right — one card is plenty.

Here's how to ease into good credit card habits: If you currently have a balance on your credit card, stop using the card until the balance is paid off. Then, once you begin using it again, only charge as much as you can pay off in full at the end of the month.

Do that for a year, and you will learn how to avoid the temptation to overspend. It's not easy, but it's one of the best financial management experiences you can give yourself. And that will serve you much better in the long run than any particular number of credit cards.

Got a question for Eva? Send her an email.