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
Can I have more than one credit card?
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.
Why might you need more than one credit card?
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:
Managing debts but continuing to spend. There are specific credit cards that allow you to move card debt onto them at a low or zero interest rate for a period. Known as balance transfer cards, they are typically used as a way of consolidating and paying down debt more quickly. You might need a card to pay off a large, existing debt but then also need a low rate purchase card for new spending
Great purchase card and travel card. If you need to buy a large tickeitem, such as electricals, furniture or a holiday, a purchase credit card can give you 0% interest for a fixed period before you have to start paying off your debt. But you might also be a frequent traveller and need a different card to take advantage of low or fee-free foreign transactions. A specialist travel credit card can be attractive for overseas use
Balance transfer and rewards. You may need a 0% balance transfer card for existing debt, but then prefer a rewards card for your new spending – which you can repay in full each month. Some credit cards offer perks when you spend, such as cashback or rewards points
Is having multiple credit cards bad?
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.
When is having multiple credit cards a problem?
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:
Being tempted to overspend. With more access to credit and a potentially higher overall credit limit, you could be tempted to spend beyond your means and not be able to pay it back at the end of the month. At this point you’ll start to incur interest and your debt will grow.
Becoming confused. Not all of us are experts in budgeting and managing our finances and having multiple credit cards increases the chances of mistakes being made, such as spending over the credit limit on one card or forgetting to pay off the balance. There are also more PINs to remember. Thankfully, most credit card companies give the option of sending helpful alerts when you’re nearing your credit limit, and it’s a good idea to set up direct debits so you don’t miss any repayments.
If you’re paying fees. Some credit cards, typically those that promise cashback or rewards on spending, will come with a monthly fee attached. The fee could outweigh the benefits of this type of card if you don’t spend enough to earn sufficient rewards or cashback. This could be made more difficult if you have a number of credit cards so your spending is split across different cards.
Taking out a mortgage. Having multiple credit cards could be an issue if you are trying to take on additional borrowing such as a loan or mortgage. This is because potential lenders may have concerns about how much available credit you have and that you could be over-extending yourself financially. But it will depend on how you manage your accounts and the view of different lenders. If you keep on top of monthly repayments and use a relatively low percentage of your credit limit each month, many lenders will not be concerned that you have multiple credit card accounts.
What can I do if I feel I have too many credit cards?
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.
Should you cancel credit cards you’re not using?
Cancelling cards you no longer use is a personal choice. But there are a few things to consider. Closing old accounts could:
Cut the chance of fraud. With fewer open credit card accounts you’re less likely to be a victim of fraud. It’s easier to be vigilant and spot any abnormal activity on your account.
Reduce the temptation to spend. Cancelling cards could be useful if you’re worried about temptation getting the better of you.
Increase your chance of getting a mortgage. It depends on how you use the cards, but some lenders might be concerned if you have too much access to available lines of credit – even if you don’t borrow up to your credit limit. Always try to keep credit utilitisation low. However, some lenders will view multiple card accounts as positive (if you’re using them well) and evidence you can manage your finances carefully. This could give them more confidence to lend to you in the future.
Impact your credit score. This is a grey area as different lenders take a different view on the way they calculate your credit score. While for some, cancelling a credit card might be seen as prudent, for others – if it leads to an increase in your credit utilisation on your remaining card or cards, this could have a negative impact on your score. The important thing is to keep managing your finances responsibly and keep check on your credit score.
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.
Other useful guides
For more help on managing credit cards, take a look at these guides:
Compare credit cards with MoneySuperMarket
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