How many credit cards should I have?

The number of credit cards you have is a personal choice based on your needs and ability to manage your credit responsibly.

The average American has three credit cards, according to data published by Experian™.^{See note1} Is that how many you should have? Not necessarily.

Before answering the question, consider the purposes of the different types of credit cards that are available, the pros and cons of having multiple credit cards and the potential effect on your credit and financial plans.

Types of credit cards

Different types of credit cards are used for different purposes. Before applying, conduct a self-assessment. Think about your spending habits, payment practices, short-term and long-term financial goals, and your credit history. This will help determine the types of credit cards that might be the best fit.

Low-rate credit card

If you intend to only pay the minimum monthly payment due, a low-rate credit card with a lower annual percentage rate (APR) may keep the balance more manageable. A potential perk is that many low-rate credit cards don't have annual fees, but they don't usually have rewards, such as points or cash back.

Secured credit card

For those who are new to the world of credit, or those who are trying to improve a low credit score, a secured credit card could be a good first step. These credit cards generally have lower credit limits that are based on security deposits made to the bank or financial institution. The institution then reports your monthly credit card payments to the credit bureaus.

Rewards and cash back credit cards

Rewards credit cards and cashback credit cards may be good options if you're working toward specific savings goals and have good payment habits. These credit cards can earn either rewards points, which can be redeemed for things such as gift cards, discounts with various retailers or travel miles, or earn cashback, which provides cash rewards on your purchases.

The APR may be higher for rewards and cashback credit cards, so keep in mind that paying off your balance monthly will help keep that interest from compounding on a carryover balance.

What is the benefit of having multiple credit cards?

Max out the points and perks.

Say you have two rewards credit cards. Credit Card A earns more points when you spend money at restaurants, while Credit Card B earns more cash back on purchases at grocery stores. If you remember which credit card to use and when, you'll make the most of the reward opportunities.

Some rewards and cashback credit cards have a quarterly rotation of the types of purchases or retailers that qualify for the benefit or a higher rewards rate. You may have to opt in to take advantage of these quarterly offers.

Improve your credit score — as long as you don't spend too much.

Your credit score is considered when you apply for personal loans, credit cards and financing for major purchases such as cars and houses. Whenever you open a new credit card, the amount of available credit in your name increases. The percentage of how much of that available amount you spend is called the credit utilization ratio. This ratio is a key factor that may affect your credit score.

Be aware of the credit line that you get with each credit card. When you spend a small portion of a high credit line, it has a positive effect on your credit score. This can give you greater spending power. Even if your credit limits increase, aim for a low credit utilization ratio by maintaining how much you spend as a percentage of your credit line.

Transfer balances to take advantage of lower interest.

Things to keep in mind getting another credit card if you're considering a balance transfer: Carrying a balance on a credit card with a higher APR means you'll pay more interest over time. If you have another credit card with a lower interest rate and a high enough limit, you could transfer the balance from the first credit card to the second and pay less interest in the long run.

Before completing a balance transfer, be sure to pay attention to any fees, terms and conditions associated with transferring balances. Some lower interest rates are for a limited time only, so make sure you know when that rate is set to expire.

What are risks of having multiple credit cards?

You might not be able to afford it.

If you're already struggling to pay off your balance each month or are only able to pay the minimum amount and interest is adding up, it's probably not a good idea to add another credit card bill. Instead, work on paying down the balance.

It can be difficult to manage.

More credit cards could be difficult to manage. It might be stressful to keep track of when and when not to use each card. Remembering different due dates and logins may be difficult, especially if the credit cards are with different financial institutions.

Too many too soon is bad for your credit.

Every time you apply for a new credit card there's a "hard inquiry" into your credit history, which affects your credit score. Try to avoid applying for multiple credit cards within a short period, as this could negatively impact your credit score. New credit, which takes into account the number of credit inquiries,^{See note1} is a factor in most credit scoring models.

You may be tempted to overspend.

The most serious risk in having multiple credit cards may be your financial behavior. Be honest with yourself: Will you be more tempted to spend more by having more credit cards? If you know you lack the discipline to curb spending when your credit line increases, avoid putting yourself in that situation. If overspending leads to mounting debt, it may be very hard to recover.

How does credit card debt effect your credit?

Avoiding credit card debt by paying balances in full every month is ideal, but don't be discouraged if you're not able to do that yet. It doesn't automatically mean you'll see a negative impact on your credit report.

Make payments on time and maintain a low credit utilization ratio, as these are the two biggest factors that affect your credit. Stay on top of monthly due dates and keep your balances low. These are good financial habits that will help you establish and maintain good credit.

The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.