Should you have multiple credit cards? Lessons from cardholders with excellent credit scores

If you’ve got it, use it.

New findings from a CardRatings.com cardholder satisfaction survey suggest that’s how people with excellent credit scores approach their credit card strategy. People within the highest tier of credit scores tend to have more credit cards than people with lower scores.

The decision involves considering both benefits and drawbacks, among other factors. Regardless of your credit score, observing how those with good credit manage adding new cards can offer valuable insights.

Credit card survey: People with excellent credit have the most credit cards

CardRatings.com surveyed over 1,600 people about their experiences with credit cards. By looking at the average number of credit cards people in different credit score tiers have, CardRatings found that a clear trend emerges. People with higher credit scores tend to have more credit cards.

Overall, survey respondents used an average of 2.5 credit cards. In general, the number of cards people had tended to correspond with the level of their credit scores.

CardRatings found that this trend was clearest when breaking respondents into three credit tiers:

Overall, the survey revealed a huge range in the number of cards people used. The survey was based on people with credit cards, so the minimum number a respondent could have was one. On the high end, some people reported having more than a dozen credit cards.

In general though, most people were pretty close to the average of 2.5 cards. However, as the table above shows, the average number of cards was higher for people in higher credit score tiers.

Reasons people with great credit scores have the most cards

There may be a variety of reasons why people with higher credit scores tend to use more credit cards:

• A higher score allows you to qualify for more credit card offers, so you have more choices
• People with successful experiences using credit are more likely to be comfortable adding new credit cards
• Successful credit users tend to understand credit cards better, so they may have different ones for different situations

While the reasons may vary, one thing is important to understand no matter what your credit score is: there can be both advantages and disadvantages to having more credit cards.

Advantages of having multiple cards

Why bother having multiple credit cards? Here are a few reasons why it might be worth having more than one:

• It’s good to have back-up. If there’s any sort of a problem with one card, you won’t be left without a card if you have other options in your wallet.
• Different cards have different functions. Sometimes you may want to optimize rewards. At other times, you may want to minimize the interest rate charged on your balance. Different cards have different strengths, and having the flexibility to play to those strengths can help you get more out of your credit cards.
• Every now and then, a particularly strong offer comes along. There are no shortage of credit card offers, but a few may represent an especially valuable deal. This may make it worth adding a new card every once in a while.
• Your finances change over time. Your credit score, payment habits, purchases and likelihood of traveling all vary as the years go along. You may need to get a new credit card every now and then to adapt.

To some extent, if you see a need for a new card you could always cancel an old card at the same time. However, holding onto old accounts can help your credit score, so sometimes it makes more sense to add than replace.

 ➤  SEE MORE:How many credit cards should you have?

Disadvantages of having too many cards

While there are sometimes good reasons for adding a credit card to your lineup, it isn’t always a good idea. Here are some potential disadvantages of applying for a new account:

• Applying for new credit can hurt your credit score. It’s wise not to do it too often.
• Access to more credit may lead to you borrowing more. If you find yourself maxing out your credit limits, adding another card could just cost you more.
• You need to be especially choosy about cards with an annual fee. Sometimes, adding a card with an annual fee is worth it for the perks it provides. However, if you accumulate these cards without benefitting, it’s just an additional expense.
• More cards can mean more security vulnerability. Think of each credit card as a point of attack for fraud. If you protect your financial information and monitor each account carefully, you can defend against that. However, when you have too many cards to keep track of it could lead to trouble.

Questions to ask yourself before choosing your next credit card

Given the advantages and disadvantages, how do you decide when it’s a good idea to add a new card?

Asking yourself these questions can help:

1. Do I plan to apply for a loan in the near future? If so, you might not want to risk dinging your credit by adding a new credit card before you get your loan.
2. How strong is my credit? If you have excellent credit, your score should be able to withstand adding a new account occasionally. However, if your credit score is on the border between prime and subprime, it may be best to hold off.
3. Am I comfortable that I’m using credit responsibly? If you spend within a budget and pay off your balances regularly, you should be able to handle a new card. However, if you’ve shown a tendency to overborrow, another card may be the last thing you need.
4. What role will this credit card play? You should have a good reason for adding a new card. Think about whether this card will provide something better or different than what your existing cards do for you.
5. Is this the best card for my needs? If you decide you need a new card, be sure to compare similar types of cards to make sure you’re getting the best available terms.
6. Am I likely to qualify for this card’s best terms? Speaking of credit card terms, keep in mind that you don’t always get the best terms a card advertises. If you have less-than-perfect credit, the terms you get may not be any better than those of the cards you already have.

The survey found that people with excellent credit tend to have more credit cards. However, this doesn’t automatically make it advisable. The key is to add cards selectively, choosing ones with competitive terms that suit your needs.