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Credit cards can be useful tools for building credit, earning rewards, and managing expenses. But how many credit cards should you actually have? This is a common question, and the answer isn’t the same for everyone. It depends on your financial situation, spending habits, and ability to manage credit responsibly. Let’s break down the pros and cons of credit cards, how to determine how many you should have, and how to use them wisely.
How Many Credit Cards Should You Have? Our Suggestion: Stick to 30%
There isn’t a magic number when it comes to how many credit cards you should have. The right number depends on your income, spending habits, and ability to manage credit responsibly. Here are a few things to consider:
1. Income Level
Your income plays a key role in determining how much credit you can handle. A general rule of thumb is that your total credit limit across all cards shouldn’t exceed more than 30% of your annual income. This keeps you from being over-leveraged and ensures you have enough income to pay off any balances in full each month.
For example, if your annual income is $50,000, a combined credit limit of $15,000 across all cards is considered manageable. However, if you’re tempted to max out your cards, you may want to start with just one or two cards to avoid getting into financial trouble.
2. Your Spending Habits
If you tend to use your credit card for regular expenses—like groceries, gas, and bills—having one or two cards might be sufficient. This allows you to earn rewards or cash back on everyday purchases without spreading yourself too thin across multiple accounts.
On the other hand, if you travel frequently or make different types of purchases (such as business expenses or entertainment), having a few specialized credit cards could help you maximize rewards. For instance, you might have one card that offers cash back on groceries, another that earns airline miles, and another for general purchases.
3. Credit Utilization
Another factor to consider is credit utilization, which is the amount of credit you use compared to your total available credit. For example, if you have a total credit limit of $10,000 and you spend $2,000 on your cards, your utilization rate is 20%.
A good rule of thumb is to keep your credit utilization below 30%. If you only have one card with a low credit limit, it might be harder to stay under this threshold. In that case, having an additional card could help lower your utilization rate.
4. Managing Multiple Cards
Having more than one credit card, or splitting purchases across multiple cards with Kasheesh, can help you earn rewards and manage your utilization rate, but it’s important to make sure you can handle the responsibility. Managing multiple due dates, balances, and spending categories requires organization and discipline. If you think keeping track of multiple cards could lead to missed payments or overspending, it’s probably best to stick to one or two cards.
What Types of Purchases Should You Use Credit Cards For?
To use credit cards responsibly, it's essential to understand which purchases are best suited for credit. Here’s a guideline for when it makes sense to use your credit card:
- Everyday Purchases: Regular, budgeted expenses like groceries, gas, utility bills, or even rent, can be paid with credit cards to earn rewards. Just make sure you have enough in your bank account to pay off the balance each month.
- Large Purchases: If you’re making a big purchase—such as electronics, furniture, or travel—using a credit card can provide extra protections like extended warranties or purchase insurance. Again, only charge what you know you can pay off.
- Online Shopping: Credit cards often offer fraud protection, making them safer for online shopping compared to debit cards. If your information is stolen, the card issuer can usually reverse unauthorized charges quickly.
- Avoid Small, Unnecessary Purchases: It’s easy to swipe your credit card for a cup of coffee or other small items, but these purchases can add up quickly. Stick to your budget, and avoid using your card for impulse buys.
Final Thoughts
The right number of credit cards depends on your financial situation and how well you can manage credit. For some, one or two cards are enough to build credit and earn rewards, while others may benefit from having multiple cards to maximize perks. The key is to be responsible: pay your balances in full each month, keep your credit utilization low, and avoid taking on more credit than you can handle.
And no matter how many cards you have, remember that splitting costs strategically across cards with Kasheesh can help you keep utilization rates lower on each card.
Ultimately, credit cards can be powerful tools for financial health if used correctly. By understanding how many you need and what purchases to make with them, you can take control of your finances and enjoy the benefits without falling into debt.
Not using Kasheesh yet? Start splitting costs across multiple credit and debit cards:
