Managing credit cards
How many credit cards should I have?
Credit cards can be a useful budgeting tool, but is it a good idea to have more than one and will it damage your credit rating? Our guide explains
Credit cards can be a useful budgeting tool, but is it a good idea to have more than one and will it damage your credit rating? Our guide explains
There is no limit on the number of credit cards you can have. Credit cards can help you manage your finances and prove to lenders that you can handle credit.
Used correctly, your credit rating won’t be negatively affected and it could even improve. That said, each card should have a purpose and be used responsibly. Otherwise, you could run the risk of racking up more debt and your credit score could be damaged.
There are several reasons why you might have more than one credit card. As well as increasing your borrowing capacity, you may want to take out two or three different cards for specific purposes, debt consolidation, overseas use or rewards points, for example. Different scenarios might include:
Having three or four credit cards isn’t bad as long you manage them properly. If you regularly miss payments or ‘max out’ your card – meaning you spend up to your credit limit, then this is likely to damage your credit score. And, if you do this over several cards the effect will be multiplied and could be damaging.
But if you use each card responsibly, paying off the balance on time every month, it gives banks confidence that you can handle credit.
Having multiple credit cards and using a smaller portion of the credit limit on each card could boost your credit score.
For example, it could be preferable to have two credit cards, each with a credit limit of £1,000 and a balance of £500, versus a single card with a £1,000 balance, which takes you up to your credit limit. You’re borrowing the same amount but as it is spread across two credit cards, you’re effectively using less of your available credit. This is known as ‘credit utilisation’. Some lenders may view this as acting responsibly because you are borrowing within your means.
Having a few credit cards could also help with budgeting as you can use different cards for different pots of spending. But if you have more lines of credit and you’re not disciplined with your spending you could end up with bigger debts – so there are risks. It’s important to think carefully about how you intend to use your credit cards.
It’s worth noting that if you apply for multiple cards and get a number of rejected applications this is likely to harm your credit score. This is because a high number of applications for credit in a short space of time makes it look – to potential lenders - like you’re in desperate need of money and your finances are not stable.
Having more than one credit card doesn’t have to be an issue, but there are certain circumstances where you may not want to have multiple cards. These include:
If you feel you’ve too many credit cards try to pay off the balance of the most expensive (cards with the highest interest rate or APR) and close down the account.
If you’ve got a number of credit cards and you’re struggling with repayments, the priority should be to clear the balances as quickly as possible. A balance transfer card could help - particularly if you can get a low or interest-free period for six or 12 months or even longer in some cases, to enable you to pay off the debt without incurring more interest.
Balance transfer credit cards are a useful way to consolidate your debts onto one card, reducing the interest you pay.
An alternative could be a debt consolidation loan. It works in a similar way. You take out a new loan at a lower interest rate than your credit cards to make payments more affordable. You then shift the balance from your credit cards onto the loan.
The important point with either a balance transfer card or debt consolidation loan is that once you’ve moved what you owe from the original credit cards, you should close down the accounts – to avoid spending on them again.
Cancelling cards you no longer use is a personal choice. But there are a few things to consider. Closing old accounts could:
One reason to keep extra credit cards might be for use in emergencies. If something crops up and you need instant access to credit, having a back-up card could be highly useful.
For more help on managing credit cards, take a look at these guides:
Understanding credit card consolidation
Tips for clearing credit cards debt
How to use a credit card to improve your credit score
If you’re looking to get a new credit card, the best place to explore your options is MoneySuperMarket.
Just tell us a few details about yourself and the type of card you’re looking for and we’ll search deals from providers across the market to find one that best suits your needs.
Searching won’t leave a mark on your credit file or affect your score. We can show you your chances of being approved for each card and if you’re pre-approved you’ll know that the deal you see is the deal you’ll get if you pass the lender’s final checks. The only thing that isn’t known before you apply is the credit limit you’ll be offered.