I’m asked this question on a weekly basis and have been for years. The infatuation with the optimal number of credit cards makes me smile because I know a secret that not many other people know. That secret is this… there is no right number of credit cards to have.
The basis for the question is purely credit score driven. Consumers rightly care and want to earn and maintain solid credit scores. One of the ways to do so is to become familiar with the things that matter, and by how much. The assumption is that you should have an exact number of credit cards, which would help your scores.
Number of Credit Cards vs. Managing Credit Cards
The hater crowd will undoubtedly suggest that 0 credit cards is the optimal number and that debt is evil… blah blah.
And while I respect the right to have your own opinion on the topic of consumer credit, I’ll be the first to point out when it’s wrong. Having credit cards is an easy and inexpensive way to establish, build, maintain, or rebuild credit. In fact, the vast majority of you started your consumer credit lifecycle by opening some form of plastic.
I’ll give you the same answer I gave for 7 years while I was at FICO and have given for the 7+ years I’ve been gone. As it pertains to your FICO score, the number of credit cards you have isn’t remotely as important as how you’re managing them. And while you can have too many inquiries or too many accounts with balances, it’s hard to have too many credit cards.
Credit Card Balance is Important
Having only one credit card that also happens to be maxed out is incredibly damaging to your credit score. Having only one credit card that also has a very low balance relative to the credit limit is very helpful to your credit score.
Having fourteen credit cards, like me, that are all paid on time and have $0 balances is very helpful to your credit scores. The last time I checked my FICO scores, my lowest was an 801. Having fourteen credit cards that all have balances is very damaging to your credit scores. Same numbers, different impact.
The Ideal Number of Credit Cards
If you really want me to give you a number of cards to have, fine… how about five?
If you can end up with five general use credit cards (those issued with a Visa, MasterCard, Discover, or American Express logo) that each have $20,000 credit limits, then you’ll be in great shape.
First off, you’ll have $100,000 of capacity or buying power (that’s probably enough for most of us). Next, you’ll have a large aggregate credit limit, which means you can charge as much as $10,000 in any one month and still not be over 10% “utilized.” That’s what I call “utilization insurance” because it’s unlikely you’ll cause any serious credit score damage simply because you had one month of expensive charges.
Finally, and this might be my favorite reason, you’ll have a diverse enough set of cards that you won’t run into any situation, in the United States anyway, where you’ll hear “we don’t take that kind of card.”
If five sounds like too many, then have fewer. If you’re responsible with your plastic and you want more, then have more. If you don’t want to have any credit cards, then don’t have any credit cards.
Opinions about how many credit cards to have are just that, opinions. None of them are fully correct and none of them are fully incorrect.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.