Hard Questions to Ask Yourself Before Getting Another Credit Card

The typical U.S. consumer is not satisfied with just one credit card. In fact, Americans had an average of 3.84 credit cards during the third quarter of 2020, according to Experian, one of the major credit bureaus.

Is having a lot of credit cards good or bad? The answer depends on how you use them.

Some consumers enjoy the flexibility of having more than one card at their fingertips. But others soon discover that all that plastic leads to overspending, says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling and a former U.S. News contributor.

“Having too many accounts can send somebody into an unmanageable financial situation,” he says.

Given the potential risk, you probably want to know: How many credit cards should I have? The right number will be different for each person and hinges on your goals, spending habits and finances.

There is no right or wrong answer to how many credit cards you should have. Think about whether you can use more than one card responsibly or whether simplicity is best.

Three is a good number of cards for most people to aim for, says Mike Sullivan, a personal financial consultant with Take Charge America, a Phoenix-based nonprofit credit counseling and debt management agency.

“That is still a reasonable number for consumers who do not carry balances,” he says.

Recently, many Americans cut back on using plastic during the pandemic-triggered downturn. The average number of credit cards per consumer dropped in every state last year, with Massachusetts and New York seeing the most significant declines, according to Experian data.

Slowdowns in credit availability and use are hallmarks of 2020, Sullivan says. “Consumers actually paid down their cards and spent less of their disposable income on revolving debt service,” he says.

Even accounting for this shift, older generations carry more credit cards than younger ones, Experian reports. Baby boomers had 4.61 credit cards in the third quarter of 2020 compared with 1.91 cards for Generation Z.

Before you add a credit card to your wallet, ask yourself:

Can I afford to carry several balances at once? Imagine a situation where you have multiple balances but not enough money to make your payments.

Losing your job or covering a financial emergency can quickly soak up savings. If that happened, would you be able to make monthly payments on time?

“You have to be able to manage the debt in a worst-case scenario,” McClary says. “If not, you need to be asking yourself if there’s a better approach to the situation than applying for that full line of credit that you’re thinking of.”

Do I have a lot of experience using credit cards? If you are new to the world of credit cards, simply opening one account is a safe choice, McClary says.

“If you’re a young consumer who is just at the age where you can apply for credit independently, start small and start slow,” he says.

Begin with one card, maintain a low balance and make payments on time, McClary recommends. “If you do those things, you’ll build a very healthy credit score that can be used to find another credit product later on that might come with a much lower interest rate and better terms,” he says.

Will I use the card enough to justify applying for it? Opening a credit card makes little sense if it will go unused, especially if the card charges an annual fee. Also, if you never use a card, it can be closed by the issuer for inactivity.

“They want you to use the account,” Sullivan says. “So they will send you a letter, and oftentimes they will encourage you to use the account before they say, ‘If you don’t use it soon, we’re going to close it.'”

If the issuer closes the account, your credit score could take a hit. But the hit will be bigger if the issuer shutters the account because you missed a payment or engaged in other careless behaviors.

Consider how well you’re managing the credit cards you have to help you determine whether to open another card, Sullivan says.

If you are not significantly paying down – or paying off – your balance each month, stick with just one card and try to rein your spending. A danger sign, he says, is if you’re only making minimum payments.

Doing due diligence is also crucial before signing up for more credit cards, Sullivan says. Ask yourself the questions above (See Questions to Consider Before Getting Another Card) and answer them honestly to steer away from a bad decision.

“People are in denial, and in my experience, they almost never ask themselves those questions,” Sullivan says.

If you have multiple credit cards and want to close some of them, proceed with caution. “If you close a large line of credit or too many lines of credit at once, it can tank your credit score,” McClary says.

That’s because the three major credit bureaus are watching your credit utilization ratio, which is how much of your available credit you use. Closing a credit card with a high limit could hurt your credit score, especially if your other cards have high balances, low limits or both.

A gradual approach is best when you have multiple accounts to close. Close no more than one credit card every six months, McClary says.

“You want to be very careful about how you do it,” he says. “Understand that even if you don’t close them all at once – you just take them one at a time – it’s still going to have a negative impact on your credit score,” he says.