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Can You Have Too Many Credit Cards? The Big Myth About Your Credit Score

It all depends how you’re using them

Americans get enticed to sign up for more and more and more credit cards all the damn time. You can’t even turn on the TV and watch sports without being hassled by Samuel L. Jackson trying to get you to sign up for one (to be fair, he has a decent wallet to keep his in). Credit card offers come at you relentlessly at every store or in your mailbox, on the internet and just about everywhere else. But can you have too many credit cards? 

Say you signed up for every card offer you got. What would happen then? Is it actually a good idea, or a terrible one? How many credit cards should you have? Alongside credit expert John Ulzheimer, formerly of FICO and Equifax, we’re rewarding ourselves by seeing just how many credit cards you should have in your wallet.

So — can you have too many credit cards? All those sweet, sweet credit card rewards… I must have them!

Ulzheimer is a credit-score expert, and that’s how he comes at this question. First of all, the answer to this is going to be different for someone who’s in some credit trouble and having difficulty making ends meet versus someone who only has a little manageable debt.  

“From a functional perspective, the easy answer and the lazy answer is, have as many credit cards as you need to function effectively,” Ulzheimer says. “Meaning, if having two credit cards means you never ever have to worry about making a payment on something or buying things, then two credit cards is good for you because it works for you.” Whereas people who have a lot of credit card debt, who carry balances every month and go over their limit, they probably have too many, as they’re clearly struggling to pay their credit card bills.

What’s a good number to have for your credit score?

Ah! Here’s where it gets interesting, as more actually tends to be better for your score. Ulzheimer reverse-engineers the how-many-is-too-many question by looking at what opening up cards does for your credit score. And the most important credit-score metric is something called “revolving utilization.” 

Think of it like this: Imagine your average monthly balance over the past year is, say, $5,000 (forget about whether you pay off the balance every month, for now). The real question is: What’s that $5,000 relative to? Do you have a credit limit of $7,500? $10,000? $100,000? It’s this ratio that’s super important. People with the highest credit scores of 780 and above have an extremely low revolving utilization ratio of less than 10 percent, Ulzheimer says.

“So if your average monthly balance chews up 75 percent of your credit limit or even 50 percent of your limit, respectfully, you don’t have enough credit cards,” he says. “Because the math isn’t working in your favor.”

 The trick is to figure out how much more credit you need each month to optimally lower your revolving utilization ratio. Does it take you four credit cards to get to a $50,000 credit limit? Okay then.

So I should just open credit cards?

Yes, you sure can. The only thing preventing you from opening another credit card is your credit history, and if that’s in good shape, you’re likely to get approved. However! This is where things get a little tricky. Bear in mind that opening new cards means adding multiple inquiries to your credit report, which can possibly ding your score. Ulzheimer says these inquiries are the lowest rungs on the totem pole, meaning they’re the least impactful to your score. It’s really just a math problem: Will opening more cards significantly improve your utilization ratio from, say, 80 percent to 20 percent? If so, your score is going to go up, Ulzheimer says, despite the inquiries.

Isn’t it, like, irresponsible to get all this credit?

It all depends on how you use it. “Consumer advocates would rather I say one [card is optimal] or none,” Ulzheimer says. “But that’s sticking your head in the sand and ignoring the reality that there are hundreds of millions of people in this country that use credit cards, and so in my mind, it’s smarter to give people an avenue to continue to use their cards and to make sure their scores are as protected as possible.”

If it isn’t obvious by now, there are two essential components to credit card usage: There’s using credit and responsibly paying off your balance, and then there’s optimizing your credit score. Once you’ve checked that first box of responsibility, you can concentrate on elevating your score. 

Can you just open cards, never use them, and not cancel them?

Yep. In fact, canceling a card, unless it’s personally problematic to you for some reason, isn’t usually a good idea. Doing so will affect your credit, and there isn’t much downside to keeping a card open for as long as the creditor will let you (just make sure it isn’t totally inactive for too long). Thanks to the Fair Credit Billing Act, along with the policies of all major credit card networks, you have no liability if a card gets stolen. Plus, the unused credit limit is clearly good for your score, and hey, you just might need that high credit limit for something unexpected tomorrow. 

What about annual fees?

Yeah, they’re a goddamn hassle! If you’re really not using the card or the rewards there’s probably no point in paying it. Although Ulzheimer, for his part, is pretty bullish on lines of credit, and thus defends annual fees. “Is having $10,000 to $20,000 of capacity on demand worth paying what amounts to a bar tab once a year?” he says. “If you’re so offended by paying an annual fee then close the thing. But at least be cognizant that you may have just lowered your credit score at the same time.” 

Charming. What’s the biggest danger of having too many cards?

Probably just the temptation to use them — and worse, to be irresponsible with them, Ulzheimer says, such as using them to supplement your income or keep up with the Joneses (why do you think credit cards offer rewards, eh?). Go down that road, and trouble isn’t far off.

That, and they risk making your wallet fatter.