How many credit cards should you have?

There’s no single right answer to the question ‘How many credit cards should you have?’ While a savvy spender can juggle multiple credit cards to make the most of special offers and reward schemes, having several cards will often result in less well-organised cardholders paying out more in interest and fees. The answer therefore depends on your financial situation and how you use the cards. 

Can you have more than one credit card?

Yes, it’s possible to hold numerous credit cards at the same time. In fact, there’s no limit to the number of cards you can have in your purse or wallet. 

Having one or more credit cards that you pay off regularly can be a good way to show lenders you are a responsible borrower who can be trusted to repay your debts. 

However, having several maxed-out credit cards and/or failing to make your repayments on time gives the opposite impression, which is one reason why having multiple credit cards is not always a good idea. 

Does having multiple credit cards affect your credit score?

Yes, the number of credit cards you have will affect the credit score lenders look at when deciding whether to accept your application for a loan, a mortgage, or another credit card. 

One of the things they look at is your credit utilisation, which is the ratio of the amount of credit you're currently using compared to the total credit available to you. It's one of the factors in determining your credit score. For example, if you have a credit card with a £5,000 limit and you've charged £2,500 to it, your credit utilisation rate is 50%.

Maintaining a low credit utilisation ratio is generally advisable, as it indicates responsible credit management to lenders. A lower ratio suggests that you're not overly reliant on credit and are likely managing your finances well. Most experts recommend keeping your credit utilisation below 30% to avoid negative impacts on your credit score.

For instance, if you have multiple credit cards with a combined credit limit of £20,000 and you have balances totalling £6,000, your overall credit utilisation ratio would be 30%. However, if you pay down those balances to £3,000, your utilisation ratio drops to 15%, potentially improving your credit score.

Banks will bear this in mind when evaluating your ability to repay the amount you are asking to borrow. 

Applying for lots of credit cards in a short time can also damage your credit score, as each application will involve a hard credit check that will be visible on your credit report – and lots of applications could suggest you are struggling financially. 

Also, while card utilisation levels of 15% or even 10% can improve your credit score, not using your credit cards may damage it.

What are the benefits of having multiple credit cards?

There are lots of different types of credit cards that are designed to meet different needs. 

If, for example, you do a lot of travelling, you might want a credit card with no foreign transaction fees. But if you want to consolidate your debts at a low interest rate, you’ll be better off with a balance transfer credit card. 

Having multiple credit cards lets you make your money go further, as long as you use each one in the situation it was designed for. It can also build a positive credit history – as long as you stay up to date with your monthly repayments. 

The potential advantages of this approach include:

• Using 0% purchase offers to spread the cost of buying big-ticket items without paying interest

• Repaying your debts more quickly with a low-interest balance transfer card

• Earning rewards, such as cashback, discounts, and air miles

• Spending less on fees and charges when you purchase items overseas 

Credit card purchases costing £100 to £30,000 are also protected by Section 75 of the Consumer Credit Act, which states that card providers are jointly liable should the business concerned go bust or fail to provide the goods or services you bought.

What are the disadvantages of having multiple credit cards?

Having numerous credit cards means numerous repayment dates, which increases the likelihood of missing one occasionally. 

So, you’ll need to be organised if you want to use multiple credit cards to take advantage of the rewards and benefits available, without falling foul of the repayment terms.

Other drawbacks to bear in mind include:

• Overspending is easier when you have several credit cards in your purse or wallet

• You’ll miss out on any offers for new customers if you already have a credit card with the lender in question

• There may be annual fees to pay and some providers also impose extra charges if you fail to use your card

• You will have lots of cards to cancel if your bag or wallet is lost or stolen – and it may also take you longer to spot fraudulent activity on your accounts

Things to consider when you have multiple credit cards

Being organised is the key to making the most of having multiple credit cards; you need to manage your spending, make all your monthly payments on time, and remember which card to use when.

Things you can do to help with this include:

• Automating your payments – by setting up a Direct Debit to cover the amount due each month – to ensure you never miss a payment and incur interest and/or fees

• Closing the accounts of cards you no longer use – this can free up space for more advantageous cards and potentially decrease your total credit limit, which might make lenders view you as a risky proposition if excessively high

• Using a budgeting app – look for one that allows you to view all your accounts, including your credit cards, in one place and issues reminders when payments are due