The Right Number of Credit Cards to Have | Smarter

Is there a recommended number of credit cards to have?
At the start of 2021, American consumers held an average of three credit cards each, according to the credit bureau Experian. There’s no one-size-fits-all answer to what’s the best number of credit cards to have, because a lot depends on your financial situation, spending patterns, and your ability to manage payments.

But as a general rule, Penny suggests that it’s helpful to have at least two credit cards so that you have a backup in case you lose one or your account gets frozen because you’re a victim of fraud.

What are the best ways to use credit cards to help with my credit score?
An important part of your credit score is your credit utilization rate, which is the credit you’re using divided by credit available to you. You can find your available credit on your billing statement or by logging in to your account online or calling customer service. Many people recommend keeping this ratio below 30 percent. However, the credit bureaus say people with the best credit scores often keep it below 10 percent, says Ted Rossman, senior industry analyst at the personal finance site Bankrate.com.

As an extra tip, you can improve your credit utilization rate by requesting a higher credit limit or paying your credit card bills early. That rate is usually calculated on your statement date, and you can bring it down if you make an extra payment or two mid-month.

How can I manage my credit cards effectively?
The first rule is to pay your bill on time every single time, Matt says. To avoid missing a payment, you can set up autopay so that you’re making at least the minimum payment each month. Otherwise, you’re risking damaging your credit score.

Second, it’s important to be aware of any annual fees you’re paying for your credit cards, says Natalie Slagle, a founding partner at Fyooz Financial Planning in Rochester, Minn. If the fees outweigh the benefits and perks of a card, then that card might not be the best one for you.

You should also use your credit cards according to the benefits they offer. For example, if you’re buying a new TV, it might be better to use a card that offers a generous extended warranty, even if that card doesn’t offer many rewards in the short-term, Ted says.

While this might be a lot of work, some people may find it helpful to maintain a spreadsheet that lists all the relevant information about their cards, including annual fees, renewal dates, and benefits such as rewards, extended warranties, travel insurance, food delivery memberships, and so on to keep track of all this information. And it’s important to stay alert to any changes to your card’s benefits by checking the mail or email from your card’s issuer.

If you’re not really using the benefits of your credit card and you’re paying too much in fees, you can ask your card issuer if you can switch to a different card that better suits your needs, and ask whether the swap will hurt your credit score. If the swap is categorized as a product change, you can maintain your credit line and account history, and avoid having to file a completely new application for a card. For more ways to cut down on the costs of your credit cards, check out our list of money-saving tips.

Bonus reading: Should you close credit cards you don’t use? Here’s our take.

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