We’re reminded constantly of how important our credit scores can be.
Many apartment listings request applicants to only apply if they meet a credit rating minimum, like 600 or higher. Getting approved for a loan — whether it’s an auto loan, mortgage, or personal loan — depends heavily on your credit score, as does the interest rate you’ll pay on said loans. Borrowing money with a lower credit score can cost hundreds or thousands of dollars more in interest charges over the lifetime of the loan. Utility companies may require customers with low credit scores to put down a security deposit before they can receive gas, electric or water services. The list goes on and on.
We’re also told that having a credit card is an excellent way to build credit. Making payments on time and handling the account responsibly signals to lenders you’re less of a risk. So, your score can increase as a result. It’s only natural to wonder: If one card is good, is two better? Three?
Is having multiple credit cards a good thing for my financial standing?
Let’s take a look at the possible benefits and risks of juggling multiple credit cards.
The Case for Having Multiple Credit Cards
As NerdWallet reports, people with excellent credit scores (785 or higher on a scale of 300 to 850) typically hold seven cards on average, including their open and closed accounts.
One reason having multiple cards can help is it increases your pool of available credit, which can bring down your credit utilization ratio. A utilization ratio of 30 percent or lower — both per card and cumulatively — makes you look more responsible to lenders.
Keeping old credit cards open can also increase the overall age of your accounts. Having a longer history positively affects your score as well. This is why many experts recommend keeping credit accounts open unless the annual fees are prohibitive.
The Risks of Carrying More Than One Credit Card
Many Americans have opened multiple credit cards with the best of intentions, only to wind up deep in debt. If there’s any doubt as to how difficult credit card debt can be to eliminate, just look over these firsthand Freedom Debt Relief reviews.
The more accounts you have, the more opportunities you have to carry balances on those accounts — whether the charges result from routine spending or having to put unanticipated expenses on a card.
It’s easy to fall into the harmful pattern of relying on credit rather than building an emergency fund. Splurging “just this once” can easily turn into a pattern of overspending, then having to deal with the financial fallout later. If you believe you may have the tendency to overspend as more credit becomes available to you, it’s generally advisable to stick to one or two cards you can carefully control, rather than entertaining new offers that arrive in your inbox.
Here’s another potential pitfall: The more cards you have, the more challenging it can become to stay on top of payment due dates. Payments more than 30 days late will show up on your credit report as a negative mark, which is why it’s very important to make payments in a timely manner. Trying to juggle multiple cards can allow important information to slip through the cracks, fueling disorganization.
This is why some people decide to consolidate their debts for the sake of simplicity; it tends to be much harder to get a handle on credit cards when there are more of them, each with varying balances, due dates and terms.
Having multiple credit cards can help you boost your credit score, provided they’re used responsibly. But the availability of more credit can also get borrowers into more trouble, which is ultimately counterproductive to the goal of raising your credit rating.