Chances are you’re used to paying for a lot of purchases with your credit card, and you likely do so without really thinking about its impact on your credit score. Like most Canadians, you may find yourself with multiple credit cards and unsure about whether that’s the best choice financially. While more cards do give you access to more credit, it can be difficult to manage multiple cards responsibly. If you’ve ever asked yourself how many credit cards is too many credit cards, you’ll want to read on to learn more about the impact they have on your credit score, both good and bad.

Is It Good to Have Multiple Credit Cards?

The number of credit cards you own is less important than how you use them. It’s always good to have a mix of credit, including cards and other loans like a mortgage, as long as you’re using them responsibly.

When you open a new credit card, you increase the amount of credit available to you, which, as a result, increases your debt to credit ratio (credit utilization). Lenders typically like when borrowers use less than 30% of their available credit, so when you have multiple sources of credit, staying within this limit is easier.

How Many Credit Cards Is Too Many?

There are several factors that contribute to your credit score, some of which include the number and type of credit accounts you have in your name. If your goal is to increase your credit score or maintain a good one, having two to three credit card accounts, in addition to other types of credit, is typically recommended as this combination may help you improve your credit mix. Lenders and creditors will like that you have multiple sources of credit on your credit report because if you’re able to keep up with these accounts and use them wisely, it demonstrates that you’re a responsible borrower.

Owning multiple credit cards can have its downfalls as well. Each time you apply for a new credit card your credit score will take a hit from the hard inquiry required by the lender. Too many of these over a short period of time can send a red flag to your lenders and cause your credit score to dip. Applying for too many credit cards makes it seem like you’re spreading yourself (and your finances) too thin and taking on more credit than you’re able to repay.

Each person’s credit needs and financial situations are unique so there is no right or wrong answer when it comes to how many credit cards is too many. The most important aspect of using credit is to make sure you’re doing so responsibly. If you have multiple cards, it’s wise to remember these tips:

– Keep an eye on your balances by checking your bills frequently so you aren’t surprised at the end of the month when you open the final bill.

– Avoid late payment fees by paying on or before the due date.

– If possible, pay off your credit card balances in full instead of only making the minimum payment.

– Check your credit reports at least twice a year so that you can see what lenders see.

Different Types And Benefits Of Credit Cards

There are many different kinds of credit cards available that offer a variety of rewards, perks and cash-back options so you can earn something in return each time you use it to pay in-store or online. Cash-Back CardsSome brands offer cash-back cards that reward you with a certain percentage of cash back for each purchase you make on the card. Some of these cards are purchase specific so they always provide 3% cash back at the gas pump or 5% back on groceries, while some offer a blanket 2% cash back on every purchase and every location.

Store Branded Cards
These cards typically carry no annual fee and can only be used for purchases at one particular store or on their corresponding website. If you do a lot of shopping in one place on a regular basis, opening a store credit card there may provide huge benefits that add up quickly.

Annual Fee Cards
Sometimes access to specific rewards makes it worth paying an annual fee for the credit card. Most of the brands offering annual fee cards with bigger rewards are travel based so if you tend to stay at the same hotel properties, fly the same airlines, or just want discounts for frequent travelling, these cards may be a great fit. It’s always wise to determine which benefits you’ll use and make sure they add up to more value than the annual fee you’ll be paying to use the card.

Does Having More Credit Cards Impact My Credit Score?

Having multiple cards can help and hinder your credit score so understanding their impact is critical to maintaining a good score. No matter how many credit cards you have, the same rules will always apply; keep your balances low and always pay your bills on time. The number of cards you have likely won’t have an impact on your credit score but you should avoid applying for several new cards at one time so your score doesn’t take a hit from too many hard inquiries from lenders. If managed properly, more cards over the long term means you have more credit available so it’s easier to stay within the recommended 30% threshold, which can actually improve your credit score.

There is no right or wrong answer for how many credit cards you should have, as each person has a unique financial and personal situation. Instead of worrying about how many cards you should have, focus on using them responsibly and ensuring you’re below the 30% debt to credit ratio whenever possible. If you’re curious about how credit impacts your ability to apply for a mortgage, or you’d like to learn more about your financing/credit options, reach out to our team at Rocket Mortgage.