Ask a Fool: How Many Credit Cards Is Too Many?

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Credit cards can be a great way to conveniently pay for things. Not only do they usually offer security and fraud protection, but the rewards programs can also put cold, hard cash back in your pocket and help reduce or avoid interest, especially if you have a few categories where you spend a lot of money. On the other hand, credit cards can be one of the most devastating financial weapons a person can have. 

With that in mind, we asked a few of our contributors: How many credit cards is too many? Here's what they had to say. 

Todd Campbell: There may not be a magic number of credit cards to own, but there is a magic number that credit bureaus use when calculating your credit score, and that number could influence how many credit card accounts you keep active.

In calculating your credit score, credit bureaus will consider credit utilization, or how much of your available credit you've used and owe.

Ideally, your goal should be to get your credit utilization below 30%. You can do that by paying down debt, boosting your existing credit line, or opening another credit card account.

Obviously, paying down debt is best, but if your credit score is strong and you don't have enough cash to reduce your outstanding balances by enough to get underneath the 30% utilization mark, then opening another account could be worth it -- as long as you don't go out and rack up a new balance!

Because credit bureaus focus on credit card utilization, having just one or two cards that are near their limit may not be as wise as having three or four cards that only have a small balance on each of them.

Jason Hall: The number really depends on your situation, and if you're able to benefit from credit cards without letting them cause you financial hardship (as Selena writes about in a moment).

In other words, if you're looking to make a particularly large purchase like an expensive TV or furniture, you can probably take advantage of a low or no-interest promotion with a store credit card. This can be advantageous, but it can also lead people to spend more than they would have otherwise, so be careful about using this "benefit" to spend more than you originally planned.

Credit card rewards can also be a great way to get points or cash for regular spending. As an example, my family spends a lot of money on Amazon.com, so we use an Amazon credit card to get 3% back on all purchases at Amazon (plus perks in other retail categories too). We also use a particular card for travel-related expenses that pays a higher bonus on these categories.

If you're able to responsibly manage multiple cards that give better rewards in certain categories, take advantage of them. If you can't keep up with which card to buy gas with versus groceries, and end up paying interest because you can't keep up with them all, you have too many. 

Selena Maranjian: This might seem extreme, but in certain situations, even one credit card is too many. For example, if you're deep in credit card debt, you would do well to just stop charging anything on your cards until you pay down your debt. That's because credit card debt is ridiculously destructive.

With many card issuers charging interest rates of 25% or more per year, being thousands of dollars in debt can quickly turn into being tens of thousands of dollars in debt. An interest rate of 25% will have your debt growing much faster than you can grow wealth -- after all, the long-term average annual return of the stock market is close to 10%, far less than 25%.

If you're mired in credit card debt, work aggressively to pay off what you owe, and consider putting them somewhere inaccessible. A loved one might hide them from you, or you might freeze them in a container of water and keep them in the freezer.

Those who are not good about paying bills off on time and being disciplined enough to only charge what they can afford to pay should also consider going credit cardless. If you're not living below your means, then you'll be unable to save and invest for your future. Studies have shown that those who pay for items with plastic tend to spend more than those who pay with cash. Give the subject some thought and see whether you're someone for whom one credit card is too many.