How Many Credit Cards Should I Have?

Thinking about getting another credit card but worried about having too many?

You’re definitely not alone.

If you’ve had a couple of credit cards (or even three) for a while, you might be wondering if it’s a good idea to open a new one.

Opening a new credit card is usually pretty simple, but it’s a big decision. Depending on how you handle your money, a new card can impact your financial life in both good and bad ways. That’s why it’s crucial to figure out how many credit cards you should have before you apply for that shiny new one.

So, how many credit cards should you have?

There’s no one-size-fits-all answer. Everyone’s financial situation and money management style are different, so deciding how many cards to have is a personal choice. The key is to open as many cards as you can manage comfortably without falling into debt or taking on extra financial risk.

While we can’t tell you exactly how many credit cards are right for you, we can help you figure it out for yourself.

So, how many credit cards should I have?

As we mentioned, there isn’t a perfect number of credit cards that works for everyone. Some people can easily manage ten or more cards, while others might feel stressed about keeping track of just two.

That said, while the numbers can vary, the general consensus is that the average Canadian has more than one credit card. In fact, it’s more like three cards. According to Payments Canada, there were 100 million credit cards in circulation across Canada as of 2022. Considering the number of Canadians over 20, that works out to just over three (3.15) credit cards per person.

Why? Because different cards offer different rewards. You might want one for cash back and another for reward points or Air Miles. Plus, having multiple cards gives you a backup if there’s ever an issue with your main card.

However, having too many credit cards just to get all the perks isn’t always the best idea. Each new card means you need to manage your finances well and pay off your balances each month. So, the main thing to ask yourself is whether you can afford to pay off the full balance on each credit card every month. If you can’t, you might end up with significant debt and a low credit score, meaning you may only qualify for credit cards for people with bad credit.

Is it a good idea to have multiple credit cards?

When managed properly, credit cards can be a great way to help you build your credit history. Having multiple credit cards can also give you more spending power and chances to earn rewards like points, miles, or cash back. But as we mentioned, opening several cards just to get all the credit card perks isn’t always the best idea (particularly if you struggle with managing your finances).

Still, it can be a good idea to have more than one credit card. On top of collecting different types of rewards or having a backup payment method in case there’s an issue with your main credit card, having a few cards can actually help credit scores by making it easier to keep credit utilization ratios low.

Here’s what we mean.

Say you have a credit card with a $5,000 credit limit, but you’ve used up $4,000 of your limit. This means the amount of credit you have used up is sitting at 80%. That’s your credit utilization ratio. When it comes to your credit report, having a lower utilization ratio is much preferred. In fact, it’s best if you keep your utilization ratio below 30%. Anything above that will lower your credit score.

But if you’re stuck in a revolving debt pattern where you charge $4,000 to your card each month and pay it off with your paycheque, only to have to use your credit card to pay for things again, how can you bring down your credit utilization rate?

One way is by using multiple credit cards.

Now, say you have three credit card accounts, each with $5,000 limits. This means your total credit limit is now $15,000. With these three cards, your overall credit utilization ratio is now only 26% with $4,000.

But you also don’t want all $4,000 on one credit card because that card itself will still read at 80%. Instead, by splitting that $4,000 across your three credit cards, you can keep both your overall ratio and your available credit per card below 30%.

How to decide how many credit cards you should have

Now that you know roughly how many credit cards most Canadians have, let’s talk a bit about how you can decide on the right number of cards for your needs. The easiest way to figure this out is by weighing the pros and cons of having multiple cards.

Pros to having multiple credit cards

For many of us, having multiple credit cards opens up a world of possibilities. Okay, that might be a bit of an exaggeration, but there are some sweet benefits to opening and maintaining more than one card.

Improved credit utilization ratio

As we mentioned, your credit utilization ratio, usually shown as a percentage, is a key part of your credit score. It measures how much of your total available credit you’re using (balance ÷ total credit limit across all credit lines). It’s generally best to use less than 30% of your available credit. One of the quickest ways to lower your utilization ratio is by increasing your available credit, which you can do by opening a new credit card.

Chance to get new rewards & perks

For your first credit card, you probably got a simple card that maybe has a few perks or rewards. But, if you play your cards right (see what we did there?), you can open new credit lines that provide you with travel points, cashback, and other bonuses. But remember, the cards with the best benefits often require excellent credit scores so always be diligent with your credit card spending.

Access to a backup payment method

If you ever have to lock your credit card due to fraudulent activity, having a backup payment method, like a second credit card, on hand is important. Of course, you can also use your KOHO prepaid Mastercard for purchases, but it’s nice to have a second credit card available, just in case.

Increased credit line for large payments

As we’ve mentioned, opening a new credit card provides you with an increased amount of available credit. This can be helpful if you’re looking to make a large purchase that you’ve been saving up for, like flights for your next vacation. By putting these large transactions on one credit card, you can keep your other card free and available for your regular daily purchases to stop yourself from accidentally maxing out a card.

Disadvantages of having multiple credit cards

Although there are plenty of superb benefits to having multiple credit cards, there are also a number of disadvantages that you ought to consider. With that in mind, here are some key drawbacks to opening a new card:

Temporary decrease in credit score

Even though having multiple credit cards can benefit your credit score in the long run by increasing your credit utilization ratio, you should be prepared for a small dip in your score soon after applying. In fact, applying for a new card can cause your credit score to drop by about five points within a month or so after your application. This change is, thankfully, temporary, but it’s worth knowing before you apply.

Requires more money management & organization

As you can imagine, having multiple credit cards can make managing your finances much more challenging. For some people, keeping track of more than one account balance is a walk in the park, but if you find that you tend to get stressed out when you receive multiple billing statements, then opening a new card might not be a good idea.

Extra annual fees

If you don’t plan on opening a credit card with an annual fee, you can skip this point. But it’s worth noting that many rewards cards do charge an annual fee of anywhere from $50 to $500 a year. When you have more than one card, you’ll be on the hook for all these payments, which can quickly add up and eat away at your bottom line.

Increased chance of overspending

Last but not least, it’s important to remember that having more than one credit card can increase your risk of overspending. When you have more available credit at your disposal and too many accounts to manage, you can easily rack up more debt than you can handle. That means anyone looking to apply for a new card needs to be prepared to exercise self-restraint in their daily spending.

Can I apply for multiple credit cards at once?

Technically, yes. You can submit as many credit card applications as you want.

But it’s important to be cautious. Multiple hard inquiries can make it look like you’re in urgent need of credit, which might suggest that you’re struggling to repay your debt. This can look bad to lenders and temporarily affect your credit score negatively.

When you apply for things like a mortgage, multiple hard inquiries within a two-week period are usually combined, minimizing the impact on your credit history. However, this isn’t the case with credit cards. Each hard inquiry for a new credit card affects your score individually, temporarily lowering it.

Can multiple cards help me build my credit faster?

Having a primary card for everyday purchases is a great way to steadily build your credit over time. You really only need one credit card to start building credit, but having more and using them responsibly gives you more opportunities to earn rewards and increase your credit line.

So, if you’re looking to build your credit quickly, adding multiple cards could help. Just be sure that you can pay off the balance of each card in full each month, as it can be easy to fall behind on payments when you have multiple bills to pay. Otherwise, you’ll just end up in debt faster, which will lead to the opposite effect on your credit history that you were aiming for.

If you choose the multiple-card route, find cards with specific loyalty programs or apps that help you manage your finances, like the KOHO prepaid Mastercard. The KOHO app provides insights into your spending habits and offers features like goal setting and expense tracking, making it easy to track and manage your spending.

So, should I have multiple credit cards?

The answer is it’s up to you. When it comes to opening a second credit card (or a third or fourth), it all comes down to what you think you can handle. Deciding how many credit cards to have is a personal choice that depends on your credit score, spending habits, and financial situation.

There are plenty of benefits to having multiple credit cards, so it’s no surprise that many Canadians carry multiple credit cards in their wallet. However, having extra cards can be tricky if you’re not ready to handle the added responsibility and risk that come with them.

Ultimately, there’s no one-size-fits-all answer to how many credit cards you should have. For some people, one card is plenty, while others might prefer having two, three, or even ten cards. The key is to find the right balance of risk and reward that works for you when deciding how many credit cards to have.

If you’re looking for an easy-to-use credit card with no annual fees or APR interest charges, look no further than the KOHO prepaid Mastercard. It offers secured spending and expense tracking, and you can even set your own financial goals. Plus, there’s no risk of overspending when you use your KOHO prepaid Mastercard. A prepaid Mastercard with KOHO is a unique financial tool because it combines many of the benefits of a credit card with the low-risk nature of a debit card.