Credit cards can be powerful and effective financial tools. When used responsibly, they can offer benefits like rewards, convenience – and the opportunity to build a solid credit history.

But embracing multiple credit cards isn’t a one-size-fits-all option. More credit cards mean more risk. So, it’s important to do your research and carefully consider your use of credit, including how multiple cards can help you make sound financial decisions. 

Here are some of the most important factors the average American should consider when it comes to the pros and cons of managing multiple credit cards.

How Multiple Credit Cards Affect Credit Scores?

Having multiple credit cards can both help and hurt your FICO credit score, depending on how you use them. For example, one of the most important factors in your credit score is on-time payment history. The more credit cards you have, the more credit card bill payments you’ll need to juggle – so it’s important to keep a careful schedule and not fall behind on any payments. 

On the other hand, having multiple credit cards means you have access to more credit, which can help keep your credit-utilization ratio low. A low credit-utilization ratio means you use a low percentage of the total amount of credit available to you, and this ratio is another important factor in calculating your credit score.

Every new credit card you open increases your total credit limit and lowers your credit-utilization ratio. But this only works in your favor if you don’t overspend – a good rule of thumb is to keep your total credit-utilization rate at 10 percent or lower.

In addition, every new credit card you open lowers your length of credit history – this is because credit scores use an average payment history instead of using your oldest account in their calculations. And every credit card you open results in a hard inquiry into your credit report, which also can bring down your total credit score. Potential lenders prefer not to see a high number of credit inquiries within a short time.

How Multiple Cards Contribute to a Diverse Credit Profile?

While credit mix, or a diverse credit profile, isn’t as heavily weighted as some other credit factors, having a diverse range of credit sources can positively influence your credit score. Successfully managing different types of credit shows lenders that you are a responsible borrower. 

But keep in mind – most financial experts would counsel against opening new accounts just to improve your credit mix. Your credit mix’s impact on your overall credit score is relatively minor.

Impact on Creditworthiness and Loan Approvals

Creditworthiness is an assessment of the risk a borrower poses to a lender. Lenders use creditworthiness, typically in the form of your credit score, to evaluate whether you can be trusted to repay a loan or credit card balance based on your past financial behavior.

Having multiple credit cards can both hurt and help your creditworthiness – since lenders are looking at payment history, credit utilization and length of credit history, among other factors. The most important thing is that you’re responsibly managing all of your available credit options. Another point to keep in mind is that lenders may take a negative view if they see you’ve opened several credit card accounts within a short period of time.

Overall, your creditworthiness is a big deal when it comes to being approved for a loan – better credit scores usually help you get better payment terms like lower interest charges, which helps you save money over the life of your loan.

Keep in mind that if you’re new to the world of credit and looking to build your credit history, a card specifically designed to help you build credit can be a powerful part of your overall portfolio. Look for something like the Juzt Digital Credit Card, which is ideal for those with no or low credit scores. 

The Role of Multiple Cards in Financial Emergencies

Many people think of using a credit card as a quick solution for an unexpected expense, especially if they don’t have an emergency fund built up. And if you have multiple cards with varying credit limits, it’s possible to designate one or more for use in emergencies only. But you should be careful if you take this approach, and most financial advisors recommend saving money over time to build an emergency fund instead. You can also tie a debit card to your emergency fund if that makes access easier.

Using credit cards for financial emergencies can be a smart move, but make sure to use your card as responsibly as possible so that you don’t run up a balance you can’t feasibly pay back. It’s also important to remember that not all emergencies can be paid for with credit cards; some vendors, medical providers, etc., may not accept credit. 

You also need to consider the effect of emergency credit use on your credit score – if you max out a high credit limit card during an emergency, your credit utilization rate increases, which may make it more difficult for you to be approved for lower-interest loans in the future.

Using Different Cards for Specific Expenses

Different credit cards can offer a wide range of various perks, such as cash back, statement credit, travel rewards, airport lounge access and discounts. If you’ll take the time to learn about the benefits and bonus categories each card offers, you can strategically use your credit to maximize your reward dollars.

For example, you may find that one card offers more rewards for gas or groceries, while another helps you earn points toward airline tickets or dining out. Some credit cards also offer extended warranty options when you purchase certain products. Using each card in a way that gains you the most benefit is a smart way to manage having multiple streams of credit. You just have to pay attention to it and avoid running up credit card balances.

Credit Card Churning: Exploring the Strategy of Opening and Closing Cards for Rewards

Some credit users engage in what’s known as credit card “churning” – frequently opening and closing credit card accounts to take advantage of perks like reward points, travel miles and cash back. This strategy can be lucrative, especially with more premium cards, but it also comes with significant risk and takes careful planning and organization.

The process usually goes like this: you find a credit card with an attractive set of benefits. You open an account, and make enough purchases to qualify for the sign-up bonus and maximum rewards, such as automatic elite status. Then you cancel the card, typically before any annual fee is due. You can repeat this cycle multiple times, which maximizes your credit card rewards.

Here’s the down side: credit card churning can have a negative effect on your credit score if you’re applying for several cards within a short period of time. The practice also can increase your credit utilization rate, which could lower your credit score. In addition, closing credit card accounts lowers the length of your credit history, which also can potentially lower your credit score.

If you’re interested in credit card churning, you have to make sure you’re organized and that you fully understand the benefits and parameters of each card. Make sure you’re setting up alerts, and perhaps auto payments, to keep accounts in good standing, and try to space out new credit card applications so that lenders aren’t pulling hard credit reports all at once.

In addition, try to keep open as many accounts as you can, which helps preserve your credit history length – for example, if you’re thinking about closing a card with an annual fee, see if you can downgrade to a no-fee version of the same credit card instead of closing the account altogether.

Rotating Card Usage to Maintain Active Accounts

Keeping your credit card accounts active, even with small charges, is essential for maintaining your credit score. So, if you have one primary card that you use, it can be helpful to switch it out for another in your collection from time to time – as long as the balance is paid in full. If one credit card stays inactive for too long – anywhere from six months to three years, depending on the credit card company – there's a chance the credit card issuer could either close your account or lower your credit limit. Both actions could negatively impact your credit score.

So, it’s important to make sure you’re periodically using all of your credit cards, even if you’re using them for small purchases or to pay bills. You can also set up automatic payments for recurring everyday spending like subscription services in order to keep your cards active. This is a great way to keep active cards that don’t have appealing rewards programs – by keeping them open, you protect both your higher credit limit and the length of your credit history.

Potential Downsides of Multiple Cards

Yes, having multiple credit cards offers benefits, as long as they’re carefully managed. There also are some downsides you should keep in mind. One of the biggest risks is how applying for numerous cards can affect your credit score. Every time you apply for a new card, it triggers a hard inquiry on your credit report, which can make your score dip, at least temporarily.

Another potential downside of managing multiple cards is the temptation to overspend. The credit from multiple cards can be very attractive when you’re considering a large purchase. But if you’re not diligent about paying off your balances every month, your credit utilization ratio goes up – which is bad news for your credit score.

And, finally, managing multiple credit cards can be administratively tricky. You’ll need to keep up with multiple due dates for payments, along with amounts owed. It’s good to set up automatic payments and/or reminders wherever you can. Otherwise, you run the risk of missing your minimum payment, which means another big ding for your credit score.

Credit Card Consolidation Options

If you do find that multiple credit cards hurt you financially, all isn’t lost. You can always explore your options for consolidating your credit card debt – which means taking the debt spread across multiple credit cards and consolidating it into one balance. With this option, you only have one payment to make each month to pay down your debt.

You can usually consolidate credit card debt through a personal loan, a debt consolidation program or 0% APR balance transfer offers.  All three options will help you pay down your debt faster, since you’re lowering – and in some cases eliminating – the high interest rates associated with credit cards. You should carefully research any potential consolidation method, but be especially careful with 0% APR balance transfers – they often come with hefty fees and/or interest rates once the introductory period ends.

 This article provides general information and does not constitute financial advice. For guidance specific to your situation, consider consulting a financial advisor or credit counselor.