How many credit cards should you hold simultaneously?

    The question of how many credit cards is one too many to have often does the rounds amongst existing and potential credit card users. Looking at it practically, having just one credit card is more than enough to live a decently good lifestyle, enabling you to purchase several of your favourite items or services. Moreover, having a single credit card and will prevent you from piling up unnecessary debt more often than not. Why are multiple cards necessary then? Say your income is relatively high and your average purchases are far greater in comparison to a person with a decent income. Do multiple cards become necessary then? Well, let’s find out!

    As a matter of fact, there really doesn’t exist magical number for the number of credit cards you should actually hold. Having multiple credit cards in your name comes with a set advantages as well as disadvantages. But do the positives outweigh the negatives? How do banks and credit institutions view multiple credit cards existing under a single individual’s name?

    As a credit card user, you must understand that your credit score isn’t impacted merely because you have multiple cards. There are several factors that account for a good or bad credit score and having multiple credit cards can actually help you improve your score. Let us find out how!

    How do multiple credit cards positively impact credit scores?

    The fundamental questions underlying credit card usage are the impact of purchases on credit scores and how credit scores can be improved. Let’s say you have three credit cards. It basically means that your line of credit or your credit limit is high, considering each of the three cards has an individual credit limit corresponding to at least 1.5-2 times your monthly income. Credit institutions evaluate your credit handling ability by looking at what percentage of allotted credit you’ve used. Using about 30% of your total allocated credit is a healthy indicator. While minimal usage is one factor that influences your credit score, there are other factors as well. Let us look at them.

    • Payment histories are a dominant factor that influence your credit score and make up for about 35% of your score. Factors considered include late payments, defaults, making just the minimum payment for several months, etc.
    • Next, the total amount of debt owed by you makes up for 30% of your score. This is where the aspect of holding multiple credit cards comes into picture. More the number of cards owned, more the debt. More the debt, more the negative impact on your credit score.
    • Note that just having multiple credit cards does not mean you are going to end up landing in debt trouble. Having just one card and piling up uncontrolled debt on that can be equally detrimental.
    • The other factors that determine your credit score are your credit history, the type of credit availed and used, and new credit availed. Credit cards, multiple or single, also come under the type of credit used.

    As mentioned earlier, having multiple credit cards and using them judiciously with careful and effective planning is certain to benefit you. For the sake of clarification, judicious usage would literally mean that you’ve used not more than 1/3rd of your total allocated credit and make all your payments on time. The fact that you have three cards implies that you have a larger allocated credit limit. Controlling your usage would mean you’ve used a lesser percentage of your credit against the total available credit, giving your credit score a sound boost. However, coming to think of it, having just one card and overshooting the credit limit is going to bad as well.

    Related Read: How to prioritize multiple credit cards repayment

    So how many credit cards should you actually have?

    It is advisable that you don’t possess more than 4 credit cards as there’d indubitably come a point when your debt will spiral out of control if you don’t exercise restraint in credit usage. Moreover, at a psychological level, more the number of cards translates to a larger combined credit limit, leading you to entertain profligacy in spending. A good way to maintain a healthy debt profile is to convert the balance on one card (if it is way too much) into flexible monthly payments and make sure you use your other cards scarcely. Multiple credit cards come with their own set of advantages and disadvantages and it is up to you to choose how you’d like to use them.

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