Are you the one who is confused as to how many credit cards you should possess? Or, do you have only one or two credit cards and you’re thinking whether to own some more or not? In reality, there is no perfect number of credit cards that you should possess. It all depends on your financial situation and how well you manage your cards. The number of credit cards that you own will surely affect your credit score. In order to maintain a good credit score, you should know all the essential factors that affect your score. One of the ways through which you can maintain a good score is by paying all your bills on time. Almost 35 percent of your FICO score depends on timely payments.
Another key factor which determines how many credit cards you should have is the debit to credit limit ratio. This ratio contributes nearly 30 percent to your credit score. Holding your balances can have a negative impact on your debit to credit limit ratio, hence resulting in a bad FICO score. If you want to know that how you can calculate this debit to credit ratio, then let me explain this. Your debit to credit limit ratio can be determined by dividing the money you owe by the total credit limit of your card. For instance, if you have a card with a credit limit of $3000 and you spend $1500, then the debt to credit limit ratio would be 50 percent, that is, 1500 divided by 3000. And, if you have a card with a credit limit of $3000, then the debt to credit limit ratio would be 25 percent, that is, 1500 divided by 6000. A lower percentage can make your credit score better.
Additionally, your individual needs can also foster how many credit cards you own. For instance, if most of your monthly expenses are on groceries, you can opt for a credit card that offers discounts on groceries and an extra credit card for your other expenses. If you want to earn rewards on your routine expenditure, then you should have atleast one rewards card such as the Discover It card, which offers rewards points and other perks on regular purchases. If you have a huge business, then most probably you’ll need one business credit card and another one for your personal spending.
The answer to how many credit cards you should have
I think that you can possess between 3 to 5 credit cards, in order to maintain an excellent credit score. This can be the optimal number, as more than this can have a bad impact on your credit score if you do not pay your credit bills on time. However, if you own less than 3 credit cards, then your debt to credit ratio can be affected negatively in case you have a habit to hold your balances.
Thus, there is no magic number of credit cards that you should own. Keep in mind your personal needs and accordingly decide that how many credit cards you can have, because all your credit cards will surely affect your credit score. For this, you can refer to your credit report, and identify your spending habits. Whether you possess one or ten credit cards, the important thing is not the specific number, but how you utilize your cards.
Moreover, you should have atleast few credit cards for backup, provided if one gets misplaced or stolen. Own cards of different franchise, like American Express, MasterCard, and Visa, so that you can be sure that atleast one of them will be accepted everywhere, especially when you are travelling abroad.