How many credit cards should I have?

Generally speaking, you want to have anywhere from two to three credit cards. Ideally, you’ll have one primary card where you charge most of your purchases and a backup payment method (i.e. another credit card) for if your main card doesn’t work.

In a perfect world, you’ll have a Visa, Mastercard, and American Express credit card in your wallet at any given time. Why? Because some merchants don’t accept every type of credit card. So by having all three card types that use different networks, you’ll always have one that works.

There’s no magic number when it comes to the number of credit cards you should have; it’s ultimately a personal choice. But anywhere from two to three credit cards is the ideal amount. However, having up to five cards isn’t uncommon, since many people use credit cards for different reasons.

Before deciding to add to your wallet, consider your reasons for wanting multiple credit cards. Some of those could include:

• You’re looking to earn more rewards
• You prefer to have multiple credit accounts so you can manage your spending or build your credit score
• You don’t typically carry credit card debt
• You want a new credit card with better benefits, such as airport lounge access or mobile device insurance
• Your financial situation has changed (e.g., you got a raise and now qualify for premium credit cards)

There’s nothing wrong with having more than one Visa or Mastercard. These are the two most common credit cards, so having two from the same company is not unusual. For example, you might have a Visa from the Royal Bank of Canada and another from Scotiabank. It’s even possible to have multiple American Express cards.

You can also have two of the same credit card, since some credit card companies allow you to have one personal card and one joint card. Alternatively, you might be an authorized user on someone else’s account. Ultimately, it’s up to the credit card issuer to decide if you can have two of the same credit card.

You can apply for as many credit cards as you want simultaneously, but bear in mind that you may not be approved for them all, and your credit score will take a hit.

Whenever you apply for a new credit card, you can generally expect your credit score to drop by five to 10 points. That’s because a credit card application triggers what’s known as a hard inquiry on your credit score. That said, applying for multiple cards from the same financial institution on the same day is sometimes seen as a single hard inquiry.

Depending on the credit card company, they may have their own rules in place when it comes to new applications. For example, some only allow one application at a time, or there may be a length of time, such as 90 days, before you’re allowed to apply for another card.

Many people strive for excellent credit scores, so they apply for multiple credit cards. While there’s no denying that having more credit cards can improve your credit score, it can also affect it in a negative way if you’re not careful.

Before making a decision, think about how your credit score is calculated. Here are the factors that determine your credit score, and how each is weighted:

• Payment history (35%): Equifax and Transunion – the two credit bureaus in Canada – want to see you with a stable credit history. That means making your payments on time each month.
• Credit utilization ratio (30%): The amount of credit you’re actively using relative to your total available credit limit is known as your credit utilization ratio. As a general rule, you want to keep this amount under 30%.
• Credit history (15%): This refers to the length of your credit profile on your credit report. Having a long history of using credit responsibly helps keep your score up.
• Public records (10%): Any previous bankruptcies or debt sent to collections could negatively impact your credit score.
• Inquiries (10%): New credit card applications result in hard inquiries, which lower your score temporarily. Limit your applications so you don’t have too many hard inquiries, especially if you plan on getting a mortgage in the near future. Financial institutions may wonder why you need access to so much credit.

Having multiple credit cards raises your credit limit ceiling, which can positively impact your utilization ratio, but if you don’t keep your utilization in check, you could see negative consequences.

For example, let’s say you currently have one card with a limit of $5,000, and you regularly charge $2,000 to your card. That would put your credit utilization rate at 40%, which is above the recommended amount.

In order to keep your credit utilization ratio low, you could apply for another credit card with a limit of $5,000, which would give you a total credit limit of $10,000. You now have a utilization ratio of 20%. In this sense, having multiple credit cards helps you out. You just need to be careful about your spending habits.

Generally speaking, you want to avoid carrying a credit card balance month over month because you’ll end up paying a high amount of interest on your purchases. The interest rates on credit cards can sometimes exceed 20%, which is a considerable amount to be paying if you have multiple credit cards.

The best thing you can do is pay off your entire credit card balance by your payment due date. At the very least, make the minimum payments to avoid missed payments. This is essential since missed payments can negatively impact your credit score.

• Increased buying power: With multiple credit cards, you’ll have a higher overall credit limit, which may allow you to make a major purchase more easily.
• Additional rewards: Every credit card comes with a different set of perks. By having some of the best credit cards in Canada, you can maximize these different benefits.
• Could improve your credit score: Using your credit cards responsibly could have a positive impact on your credit score, since it shows lenders that you can use and repay multiple forms of credit without trouble.

• You could end up spending more money: Having access to more than one credit card may encourage you to spend more or start living outside your means.
• High fees: Many credit cards come with an annual fee. With too many credit cards, you could see those fees add up fast.
• More to manage: Multiple credit cards means you’ll have different billing cycles every month. You’ll need to stay organized and ensure you manage your available credit and pay your bills on time.

• Make a spreadsheet: The easiest way to keep track of having several credit card bills is to make a spreadsheet with all of your billing cycles. This will ensure you never miss a payment.
• Check your credit score regularly: It’s never been easier to check your credit score. There are several online free tools that allow you to keep tabs on your score and ensure it’s in good standing, including Borrowell and Credit Karma.
• Minimize your annual fees. Having multiple credit cards can get expensive. Sticking to cards without an annual fee can help you keep your expenses down.
• Set up automatic payments: If you’re worried about missing payments, you can automate things so the money is taken right out of your account each month and applied to the balances of all the different cards you have.
• Review your cards annually: Going through your wallet once a year and cancelling the cards you no longer need can help you with your budget. That said, you may want to keep your oldest card active since your length of credit history affects your credit score.