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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

 

A question that is often asked by people in the realm of personal finance is "How many credit cards should I have?" This question becomes even more pertinent when you are thinking about adding tradelines to your credit report. Let's decode this issue, offering you the insight and direction to make sound financial decisions.

The Conundrum of Credit Card Numbers: Why It Matters

The number of credit or debit cards you use is not only something that you can do for personal convenience. It also influences the credit score. While you're aware that an account with a credit card will improve your credit score, you're likely confused as to how many credit cards you need to have.

The Pros and Cons of Owning Multiple Credit Cards

Before we dive into the number of credit cards you're required to own, let's first look at the advantages and disadvantages of owning multiple credit cards.

Advantages of Owning Multiple Credit Cards

  • If you've got several credit cards your credit limit might be higher. A credit limit of high amount is helpful for emergency expenses or large purchases.
  • Utilize credit cards with rewards or cashback programs to reduce your expenses on things daily.
  • The ratio of your credit utilization is likely to increase. Your credit utilization ratio is a reference to the percentage of your available credit that you currently use. A variety of credit cards can boost your credit score by splitting your balances.

Disadvantages of Owning Multiple Credit Cards

  • Multiple credit cards can make it more likely to overspend and enter debt.
  • It's easy, and often unplanned, to make purchases that you're not able to pay for when you have many credit cards.
  • managing multiple credit cards may require long and time. Particularly if the payment schedules vary.
  • In addition, more cards could result in very high utilization of credit. A high CUR could hurt your credit score.
  • Different cards offer different perks. If you have too many cards, you risk missing out on diverse benefits.
  • On the flip side the other hand, having too many cards can make tracking payment due dates a struggle. It could lead to unpaid fees and a degraded credit score.

Key Points to Consider When Applying for Credit Cards

  1. Diverse Benefits: Look for cards with various advantages, such as cashback, travel rewards, or low-interest rates.
  2. Annual Fees: Check to ensure that the card's benefits far exceed any annual charges.
  3. Interest Rates: An APR that is low is crucial unless you're confident that you'll pay the balance each month.
  4. Credit Limit: A higher credit limit can improve your credit utilization ratio, as long as you don't max it out.

Average Number Credit Cards Should I Have

Now that we have looked at the advantages and disadvantages of having multiple credit cards, let's consider the number of credit cards you should have. How many credit cards are too many, and how many are sufficient?

Financial experts suggest having between 3 and five credit cards in order to build a well-rounded credit profile. This gives you many benefits and helps with the credit utilization ratio.

Factors to Consider When Deciding The Number Credit Cards to Own

There are many factors to take into consideration when deciding on the number of credit cards to keep. These include:

  • Credit score and past history Your credit score and history will determine the number of credit cards to have. You could only qualify for a couple of credit cards, if have poor credit scores or a poor credit history.
  • Spending and income: Your income and expenses will also be important. If you have a good income and low expenses, you can manage more credit cards than someone with a lower income and more expenses.
  • Priorities and goals for your financial life: The goals you have for your finances and the priorities will determine the number of credit cards you should have. If you are looking to improve your credit rating, or earn rewards points, you should consider having several credit cards.

Recommended Number of Credit Cards Based on Different Scenarios

Here are some recommended numbers of credit cards based on different scenarios:

  • for those with no credit history If you do not have credit history, then you might qualify for one or two credit cards.
  • For those with average credit scores If you have an average credit score you may possess two to three credit cards.
  • for those with high credit scores: If you have excellent credit scores you may be able to hold at least four credit cards.

How Owning Multiple Credit Cards Affects Your Credit Score

Now that we have examined how many credit cards should you have, let's explore how applying multiple credit cards can affect your credit score.

Positive Impact of Owning Multiple Credit Cards on Credit Score

Possessing multiple credit cards may improve your credit score by a variety ways that include:

  • Improved credit utilization ratio Possessing multiple credit cards could assist in improving your CUR. The spreads your balances across 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 impact your credit score the following ways:

    • Higher risk of missing payments and delinquencies: Owning a lot of credit cards can lead to greater risk of missing payments. There is also the possibility of being in delinquency on your accounts.
    • New and increased credit inquiries as well as new accounts Inquiring for multiple credit cards can be the cause of multiple credit inquiry and new accounts. Both of these could lower your credit score.
    • Lower average account age Multiple credit cards can help reduce the age average of your accounts. This can affect your credit score.
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