3 Little-Known Perks of Having Multiple Credit Cards

There are plenty of good reasons to open a credit card: You'll be able to buy things even if you don't have cash right away. You'll be able to establish a credit history that will hopefully lead to affordable loans in the future. And you could even earn rewards on your purchases.

Eight in 10 Americans have credit cards, but 30% prefer to keep just one card in their wallets. This isn't necessarily a bad choice, but it could cause you to miss out on the following three perks.

1. Less disruption if your card is stolen

Your credit card might get stolen (or even lost) at some point in your life. You're generally not responsible for fraudulent purchases as long as you notify your card issuer quickly. But it will usually cancel your existing card and issue you a new one with a new number.

It will probably take a few days to a week to get your new card, and you could run into problems during this time if you only have one credit card. You'll have to rely on cash or a debit card for purchases. If this isn't an option for you, you might have to borrow money from a friend or wait to make purchases until you get your new card.

This isn't an issue if you have a second card as a backup. You can switch to that one while you wait for your new card to come in. The only time this wouldn't work is if your entire wallet was stolen. If you prefer, you could keep your backup card in a safe place to avoid this.

2. Improved credit score

Opening another credit card isn't guaranteed to raise your credit score, but it often does because it lowers your credit utilization ratio. This is the ratio between the amount of credit you use each month and what you have available to you. For example, if you have a $1,000 balance on your card with a $5,000 limit, that gives you a credit utilization ratio of 20%.

Credit card issuers like to see a low credit utilization ratio as long as that number is above 0%. It suggests you're living within your means. A credit utilization ratio over 30%, on the other hand, suggests you're heavily dependent on credit and may have trouble paying back borrowed money.

If you're approved for a new credit card, you automatically gain access to more credit. If your spending remains more or less the same, your credit utilization ratio will drop and your credit score will rise.

But this isn't a strategy you want to overuse. Every time you apply for new credit, the card issuer does a hard inquiry on your credit report. This drops your score by a few points. Usually, all hard inquiries that occur within about 30 days of one another only count as one inquiry on your credit report so as not to penalize those shopping for a good deal on a credit card or loan.

But inquiries more than 30 days apart could each take a separate toll on your score. To avoid this, only apply for new credit about once every six months, and even then, only do so if you feel you have a decent chance of getting approved.

3. Maximize your rewards

Every cash back rewards credit card has its own system for earning points. Some offer a flat 1% or 1.5% back on all purchases while others have rotating bonus categories that change quarterly. Then, others offer higher cash back rates on specific categories, like dining, all the time.

Having multiple credit cards in your wallet enables you to maximize your rewards by choosing the right card for each purchase. You could have one card you use every time you get gas, for example, and another you use for groceries or dining out. If you shop at a particular store often, you may also want to own its card to unlock special savings offers.

How much you'll earn depends on the cards you have and how much you spend. But even 1,000 extra points could add up to $10 in cash rewards on a lot of cards.

It's totally fine if you're not comfortable keeping track of multiple credit cards. But if you like the idea of any of the above benefits, consider shopping for a new credit card today. Compare a few top offers and look for one that aligns best with your spending habits so you can get the most out of it.