This is a personal question that requires a personal answer. Realistically, each additional credit card that you carry is a risk/reward tradeoff.
The Pros of Carrying Multiple Credit Cards
More Rewards on Your Everyday Spending
Carrying multiple cards allows you to earn more rewards on the spending you're already doing. You can choose pairs of cards that strategically maximize the benefits you receive, and you can route transactions to the card that helps you earn the most benefits. Moreover, the amount of benefit that you get is highly dependent on your spending patterns. You'll be eligible for receiving cash bonus offers if your spending on the new card reaches certain thresholds.
A Backup If a Card Is Lost or Frozen
Holding multiple credit cards gives you a backup option if one of your cards is lost or frozen. If something happens to your physical card, you will need to shut it off immediately, and a second card can help reduce inconvenience.
A Lower Credit Utilization Ratio
Maintaining a low credit utilization ratio can boost your credit score. With your spending divided over more cards, your spending per card will decline. This lowers your credit utilization ratio and is generally positive for long-term credit score health.
The Cons of Carrying Multiple Credit Cards
Each Card Is a Monthly Commitment
Each credit card you carry is a commitment. You need to pay your balance each month to avoid incurring late charges and hefty financing fees. Realistically, this is the biggest risk with holding multiple cards, and it means in some cases the right number of credit cards may be zero. We suggest using tools like auto pay to reduce the risk of a forgotten payment.
Applications Affect Your Credit Score
Each credit card that you apply for impacts your credit score. You want to be thoughtful and intentional about where you apply, since each application affects the likelihood that you will be approved for a new card or loan in the future. This is why we recommend doing individualized research on your personal best cards before applying.
Annual Fees Add Up
Some credit cards have annual fees. You need to be thoughtful about whether the additional value of a card with an annual fee actually exceeds the fee. Moreover, you will need to revisit this decision annually when the fee comes due.
Too Many Applications Can Work Against You
Some credit card providers limit customers who submit too many applications in too short a period of time. Applying for a new card impulsively without a spending plan may preclude you from future rewards with the same provider. Moreover, without a spending plan, you may fall short of bonuses.
Why Reevaluating Your Cards Annually Matters
Weighing these pros and cons is essential to making an informed decision about whether applying for a new card makes sense for you. Many credit card companies are assuming you will open an account and stick with them for years rather than reevaluate which card terms are best for you. Since your spending patterns and card reward terms change, we recommend reevaluating your credit card holdings annually.
Moreover, many credit card reward structures are skewed to provide disproportionate rewards to new customers at the expense of existing customers. This is often through one-time bonus structures rather than recurring annual benefits, contrasted with annual fees that charge yearly even if the card is unused. This makes extending your card portfolio comparatively more attractive to claim new bonus payouts, and makes continuing with your existing card setup comparatively less attractive if your bonus payout has already occurred.
3 Signs It's Time to Get a New Credit Card
This gives a reasonable rule of thumb for when we recommend it's time to look for a new credit card:
1. Your Current Rewards Are Saturated
Your current reward structure is saturated and paying below market rates, and your everyday spending would earn significantly more on a different card. This is a purely mechanical question, and research and simulation can tell you exactly how much competing cards would pay for your spending.
2. Your Credit Score Is Strong and No Major Loans Are Coming Up
You have a high credit score and you are not planning to apply for a loan (for example, a mortgage) in the near future. This is a personal question based on your individual financial goals.
3. You Can Comfortably Manage Another Bill
Your existing cards are all paid in full, and taking on one more monthly bill is manageable for you.
So, How Many Credit Cards Is Right for You?
This rule of thumb ties together two related questions: it's time to get a new credit card when there is a specific new card to apply for that works better for your spending and lifestyle. We favor strategic and thoughtful planning around what the most competitive card is for you. Our simulation engine can help you answer these questions by reviewing your real spending to quantify exactly how much extra value we think each card can earn for you.