How Many Credit Cards Should you Have?

A credit card can be a powerful financial tool used for spending your way to an excellent credit score or simply earning points and rewards on everyday purchases. But exactly how many credit cards should you have? We did the research to help you make a more informed decision.

Let’s dive in!

Types of Credit Cards in Canada

There are several types of credit cards in Canada. Let’s check out what the most popular choices have to offer:

  • Reward cards – This card rewards you when you use it for everyday purchases. The points you collect can be exchanged for travel miles, retail discounts, cashback, concert tickets, and more. However, reward cards by major credit card companies usually charge high annual fees and interest rates. Before applying, make sure there’s a good balance between the benefits and the costs.
  • Secured cards – If you need to begin building or wish to repair your credit history, a secured card is the way to go. Generally, secured credit cards require a security deposit upfront to secure your line of credit. 
  • Balance transfer cards – Should you already have a credit card, but want to pay a lower interest rate, consider a balance transfer card. You can move your existing credit card debt from other credit accounts to this type of card at a small fee. While these cards usually have a 0% or low interest rate, you might need a high credit score to apply.
  • Travel cards – Travel enthusiasts can make the most out of their often expensive trips thanks to travel reward programs. Similar to the reward cards, you can earn points redeemable for flight tickets, free checked bags, hotel stays, and plenty more.

What is the Ideal Number of Credit Cards?

When it comes to the right number of credit cards to own, having at least one credit card is optimal. This means that credit bureaus will have an overview of your financial profile. 

Having a strong financial profile is crucial, as everyone from landlords to banks or other lenders checks your credit scores to evaluate if you are financially reliable. Furthermore, your credit score also determines the interest rate you are required to pay on a loan.

You might be interested: What are the Benefits of Credit Cards?

Should you own multiple credit cards?

There is no rule about the exact number of credit cards you should own. However, having more than one credit card is helpful for taking advantage of perks and rewards offered by different credit cards

The only thing you should keep in mind if you decide to get several credit cards is maintaining a good credit score, as credit bureaus evaluate your payment history for each credit card. What’s more, plenty of credit card issuers are working to prevent credit card churning, a practice where a user applies for more than one credit card to enjoy different perks. 

Learn more: Credit Card Churning

how-many-credit-cards-should-you-have

How does using multiple credit cards affect your credit score?

Owning several credit cards can help you boost your credit score by decreasing your utilization ratio. In simple terms, the credit utilization ratio is the percentage of your total available credit that is currently used. 

Suppose you have a $500 balance on one credit card with a credit limit of $1,000. The credit utilization ratio is calculated when you divide the total balance by the credit limit. Then, multiply it by 100 to get the exact percentage. In this case, your utilization ratio would be 50%

Similarly, if your balance is the same but you own two different credit cards with a $1,000 credit limit each, your utilization ratio would be 25% ($500 ÷ $2,000). A lower utilization ratio (mostly below 30%) is generally considered good by credit bureaus and lenders

Carrying multiple credit cards can be helpful in terms of improving your credit score and providing additional financial information to credit bureaus. Still, opening new credit cards can impact your credit score negatively as it decreases the average length of your credit history.

how-many-credit-cards-should-you-have

Benefits of Having Multiple Credit Cards

Using more than one credit card comes with its perks. Read along to find out what advantages you can enjoy:

  • Maximizing rewards 

The bigger your stack of credit cards, the more rewards you can pocket. For instance, one credit card can get you attractive travel perks, but won’t earn you points on food and grocery purchases. Owning more credit cards gives you a better chance at receiving more rewards than you would with one card.

  • Increase your credit

One of the most important factors affecting your credit score is the utilization ratio. Namely, the lower your credit utilization ratio, the better your credit score will be. Each new credit card is increasing your credit limit, thus lowering your ratio.

  • Back up payment options

Not all credit cards are accepted everywhere. For example, a large number of restaurants and retailers do not accept American Express cards. In this case, carrying another credit card issued by either Mastercard or Visa will come in handy. 

Additionally, carrying multiple credit cards can also be helpful if your primary card is lost, stolen, or inaccessible at the moment due to suspicious activity.

Potential Downsides of Having Too Many Credit Cards

  • More bills to manage

Too many credit cards come with greater responsibility. In fact, you will have to keep a record of several different interest rates, monthly statements and payment due dates. So, you might want to keep your credit card number to a minimum until you can handle having several cards. 

  • Annual fees

If you are carrying multiple credit cards, you will also have to pay significantly more for annual fees and it would be a costly option for you. 

Consider signing up for “no fee credit cards” and if you have an old credit card that you rarely use, reach out to your card issuer and ask if the fee can be waived or if your card can be replaced with a no fee alternative.

  • Risk of overspending

More available credit also brings a higher chance of accumulating debt. What is more, higher credit limits can tempt users to overspend. To lower the risk of spending over your limit, consider applying for fewer credit cards or cancelling a credit card. Finally, make sure to pay your bill in full on the due date to avoid interest charges.

how-many-credit-cards-should-you-have

How many Credit Cards Does the Average Canadian Have?

76.2 million credit cards were in circulation in Canada as of January 2021.

(Statista)

The number of Visa and Mastercard cards in circulation in Canada has been steadily decreasing since 2016 to reach 79.6 million in 2018. An all-time peak was recorded back in 2013 when the number was 81 million.

Around 70% of Canadians don’t pay an interest rate. 

(Canadian Bankers Association)

This is mainly due to the fact that 70% of them regularly pay their credit balance in full, therefore avoiding interest charges. 

Additionally, major credit card companies on the market offer many low interest cards, with over 30 of them having interest rates of less than 13%.

33% of surveyed Canadians used a single credit card in 2018.

(Statista)

Another 33% stated they used two credit cards, whereas 18% used three. Only 16% of respondents said they used 4 or more credit cards. In addition, 69% of the surveyed Canadians used one debit card. 

Bottom Line                    

All in all, carrying at least one credit card is highly recommended, but if you prefer to use multiple credit cards, you have to be responsible and maintain a good credit score.

Lastly, keep an eye on the payment terms, interest rates, monthly statements, and annual fee of each card to cut down on expenses and get the most out of your credit card.

FAQ

Should I get a second secured credit card?

While you can still keep up a good credit score by using a single secured credit card, two secured credit cards can help double the positive information sent to credit bureaus monthly.

Can you have multiple of the same card?

The majority of credit card issuers will give you the possibility to get two of the same credit card. Nevertheless, you will most likely need a product change to do so. To make sure your issuer allows applying for the same card twice, check their terms and conditions.

Can I open two credit cards at the same time?

Applying for two credit cards in a short period of time is possible, but you need to be careful of how they might affect your credit score if you’re not maintaining them properly.

Is 5 credit cards too many?

There is no general rule about how many credit cards you should own. Having more than one credit card can improve your credit score on one hand, but it can also damage it on the other. This is why it’s important to manage all your accounts properly if you decide to carry several cards.

How many credit cards should you have?

There is no right number of credit cards you should open. It all depends on your personal preferences and how you intend to use them. For instance, you can apply for a secured and a rewards card if you’re looking to both build credit and earn rewards.

 

ABOUT AUTHOR

With an early start in journalism and years of work as a technical translator, Marija felt it was natural to blend the two. Passionate about news and research, she enjoys sifting through the data, researching new currents and the constant changes in our technologically and financially driven lives, as well as presenting the stats and facts to the readers so you don’t have to dig deep on your own.

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