How do you know when you've had too much of a good thing? Sometimes, it's obvious, like the slightly queasy feeling you get after a second helping of dessert. But other times, it's less obvious, like when your collection of credit cards slowly multiplies into a full deck.
Count up the number of credit cards you carry and see how you compare with the average consumer. According to Experian Consumer Direct, an arm of one of the big three credit reporting agencies, you're a card-carrying average American if you hold four credit cards. You're definitely in the majority if you have at least two.
But, you're not alone if you have a lot more. Based on a sampling of their credit records, about 14% of the U.S. population holds more than 10 credit cards. It may be a sign that you have too many credit cards when they outnumber your fingers or toes.
One of the Fool's 10 rules of good credit management says that most people really need only one or two credit cards. Use one for purchases, and pay it off every month. Keep a second for emergencies. Some people also keep that second card for business purposes to segregate their work expenses from their personal purchases.
Why carry additional credit cards? You might have a good reason. If you've had one card forever but you're not so enamored with its terms or interest rate anymore, you may choose to use it occasionally and keep it active on your credit report. A long record of good credit can work to your advantage and improve your credit score.
If you're paying down a lot of debt and trying to maintain your balances on lower-interest credit cards, you may have a few extra cards in your hand. Transferring your existing debt to credit cards with the lowest interest you can find can help you pay that debt off much more quickly. Get more strategies for paying off your credit card debt in this section of the Credit Center.
Other people with a handful of credit cards may have no particularly good reason for holding that stack. You may simply have a lot of credit cards because you've been hopping around from one to the next as you find better interest rates and terms of credit.
In that case, you might want to take a look at your old, inactive accounts and consider closing any credit cards you're no longer using. You'll simplify your life and your filing cabinet considerably. Don't do this if you have a major purchase on the near horizon, as it may temporarily affect your credit score.
If you have a whole pile of cards and you're using them all, you probably need to impose some order. Compare the interest rates, the terms, and the potential rewards of all of your cards. Use only the best one or two in the stack. Set the rest aside and think about whether it makes sense to keep those cards at all.
If you're actively using a bunch of cards, that may also be a big red flag that you're simply spending too much. That's almost certainly true if you're carrying a balance on some of your many cards, or you're struggling to pay the minimum each month. You may also be using more of your available credit than lenders like to see.
The Experian study suggested that you're likely to have a large stack of credit cards if you're using more than half of your available credit. Those folks carry an average of 6.6 credit cards. Their credit scores suffered from their high balances. On average, people using 50% or more of their available credit have an average Experian credit score of 645, lower than the 674 national average.
If that scenario sounds familiar, take a look at this article to learn how to ignore the rules the credit cards want you to follow. You'll also find other tips for managing your credit in the Fool's Credit Center.