How Many Credit Cards Should I Have?

Does getting a second credit card hurt your credit score? 

A second credit card can may help your credit score in cases where it would reduce your utilization ratio and increase your credit mix, two positive factors for your credit score. If you have access to additional credit, but utilize a small portion of your credit limit responsibly, it could make you look more financially responsible in lenders’ eyes.

Applying for a new card can have a negative effect on your credit score: as hard inquiries on your credit report (which happen when a lender pulls your credit report when you make an application for credit) can signify that you are looking for more credit than you currently have. However, with a few months of using your card responsibly by paying your balance off each month and making your payments on time, the negative effects of a hard inquiry could be balanced by a good payment history.

Should you apply for multiple credit cards at one time?

While using multiple credit cards responsibly can increase your credit score, you should not apply for them all at once. Applying for multiple credit cards at the same time will lead to many simultaneous hard credit inquiries, which can negatively impact your credit score. It can also affect the length of your credit history, which is calculated by taking the average age of all your credit accounts and can also impact your credit score. All these factors could make you look less reliable to a potential lender, so it is best to open up new credit cards sparingly to signal healthy credit behavior.

How many credit cards is too many?

If you are managing your debt responsibly, it can make financial sense to have different cards to cover different types of expenses. A travel credit card can earn valuable reward points for travel spending, while other cards may provide a bonus for dining or groceries.

If you are considering closing a credit account, be aware that closing accounts can have an impact on your overall credit score if it reduces your available lines of credit and changes the average age of your credit accounts. Closing the account that is newest has less of an impact on your score than closing the oldest account.

If you are thinking of applying for a new credit card, be sure to compare available offers to find the one that fits your needs. The basic rule of thumb: Don’t apply for credit cards you don’t need, won’t use, or could be tempted to use too much.

Benefits of multiple credit cards

More purchasing power, the opportunity to earn different types of rewards, and the potential credit score benefits are among the many benefits that could apply when holding multiple credit cards.

Holding a combination of different types of cards can help maximize your rewards in different categories of spending. For example, using the American Express^® Cobalt^TM Card can earn you 5 Membership Rewards^® points for every $1 spent on eligible eats & drinks purchases in Canada¹ and 2 points for every $1 spent on eligible gas, transit & ride share in Canada¹. Adding more rewards cards to your wallet can allow you to use cards that offer accelerated earn rates on certain categories, so you can use different cards for different types of expense.

While adding another credit account may initially hurt your credit score if a hard inquiry is performed during application, holding a diverse set of credit cards may help improve some measures that contribute to your credit score.

Credit utilization ratio is one credit score factor. It measures how much debt you currently have versus the total amount of your credit limits across all of your credit cards. By adding a new card to your credit profile, you increase your available credit limits and therefore reduce your credit utilization ratio, which can have a positive influence on your credit score, provided your debt remains at the same levels across all cards.

Adding a new credit card will give you another option if your other payment methods fail. This can help with emergencies (like losing or misplacing a card) or if your preferred merchant doesn’t accept your other cards. Diversity in your credit accounts allows you to have options when making your purchases.

Adding a new credit card may allow you to increase your overall available credit, giving you more financing options to cover your expenses. Maintaining a healthy habit of on-time payments may signal to lenders that you have the ability to take on even more credit.

How to make multiple credit cards work for you

To make multiple credit cards work in your favour, it’s important to be strategic and stay organized. Missing a payment or getting carried away on a shopping spree could have negative consequences. Consider how much credit you actually need, what you can handle, and how to avoid paying too much in fees and interest.

Paying your credit card bills on time is crucial when managing multiple accounts. This can help keep your credit score high as well as your eligibility for offers in good standing. Take the time to effectively organize your bills, making sure to pay off the balances.

While it could be tempting to go shopping with credit, it’s important to stay on top of your spending so your balances don’t become unmanageable. Consider how much credit you actually need and how much you can afford to pay once interest and other fees kick in.

To save some of the additional costs that can come with some credit cards, consider applying for a no annual fee credit card. It can still come with an attractive range of benefits, while giving you a little more room when planning your finances.

Adding or losing a credit account can certainly impact your credit score, so when you are considering how many credit cards you should have, understand that regularly repaying debt on-time across multiple cards is important to send a healthy signal to creditors and other lenders.