There’s a lot to like about credit cards. They’re more versatile than cash and safer to carry, and they take up a lot less space in your wallet than the wads of cash you’d need for a large purchase. They also help build credit you can use toward other aspirational goals, like the home of your dreams or (on a more mundane level) a newer and more reliable car.
Accordingly, there are a lot of credit cards in use in the U.S.; 350 million or so in early 2021, according to figures from the American Bankers Association (ABA). Clearly most of us have one, and many of us have multiple credit cards. That raises an important question: How many credit cards is too many? There are positives to having more than one, but opening too many accounts can increase your risk of identity theft among other hazards.
Is It Good To Have Multiple Credit Cards?
There are a number of reasons to keep more than one account open at all times. The obvious example is a “just for emergencies” card — the one you keep in reserve for things like sudden repairs or medical issues. You might also use certain cards for specific types of spending, as a budgeting aid. You might even carry specific cards because of their rewards, from cash back to frequent flyer miles.
The workings of the credit-scoring system provide another powerful motivation for having more than one card. One of the biggest components of your FICO score is the amount of debt you owe and how it relates to your available credit (i.e., “credit utilization”). If you owe — for example — $1,500 on a card with a $2,000 limit, your utilization is at 75% and can limit your score. If you have two cards with $2,000 limits, your utilization is 37.5% and looks much better to lenders.
That may not sound right, especially if you’re militant about paying off your cards every month (payment history is the single biggest factor in determining your FICO score), but that’s the reality.
The Downside of Multiple Credit Cards
Of course there are also negatives to having multiple cards, some more important than others. The most obvious example is accumulating more debt than you can reasonably manage (it can sneak up on you, as most of us learn at some point). If you’re a rewards chaser, diluting your purchases between multiple cards can slow your progress on the reward programs that mean the most to you. Also, the more cards you’re actively using in a month, the greater the risk that you’ll overlook or be late on a payment; which — to reiterate — is the biggest single factor in determining your FICO score.
Applying for too many cards in a given time frame can torpedo your score as well. It can signal desperation or an overly optimistic assessment of your own ability to pay the bills, or many other unpleasant possibilities. Lenders want no part of that and your score will drop in consequence.
Finally, every card you carry — or even apply for — can increase your risk of identity theft.
Credit Cards and Identity Theft
That statement may seem like a stretch, but it’s a simple statement of fact. Every card, and even every credit application, is a point of vulnerability for you. Here’s why:
- There are hundreds of data breaches every year, many of them affecting financial institutions. Every company that has your financial data can potentially lose your financial data.
- The more cards you have, the more offers you’ll receive. Thieves can steal those from your mail, accept preapproved offers in your name, and be off to the races.
- The more cards you have, the more statements you’ll receive. Dumpster-diving criminals can retrieve those, and then — armed with the information from your statements — make purchases on your existing accounts or fake your identity to create new ones.
- The more cards you have, the greater the likelihood that one of them can go missing from your home or wallet without you noticing.
Those possibilities are, of course, just the tip of the iceberg. A more troubling issue is that the accounts you don’t ordinarily use are ripest for exploitation by identity thieves. The ABA’s numbers show that over 24% of current accounts are dormant: Either they’re your designated “emergency use only” card or accounts that you opened “for certain reasons” and have largely forgotten about.
Gaining access to a dormant account is pure gold for criminals. You’ll notice pretty quickly if there’s any hanky-panky on the account you use every day or two for gas and groceries. That’s not the case for a card that’s gathering dust in your dresser drawer (as far as you know…), so it gives scammers a lot more runway for using your card before you notice. It’s even worse if that card you’ve put away for an emergency has an extra-high spending limit, which is often the case.
How Many Credit Cards Is Too Many?
So what’s the correct number of cards to have? There’s no single number that’s right for everybody, and if you only have two or three you probably don’t have to be overly concerned. If you have four, then one is statistically likely to be dormant.
A better approach is to take a look at which cards you actually use and why. It’s perfectly appropriate to have — for example — specified cards for gas, or for online purchases, or for travel, as well as one for general use and one for emergencies. It’s also fine to have just one for spending and one for emergencies; it’s really about what you need.
That being said, if you find you have multiple cards that see little or no use, it’s probably a good idea to reduce that number. Choose one to designate as your “emergency” card and keep it in a safe place, and then close out the remainder. Bear in mind that the length of your credit also affects your FICO score, so try to keep your oldest accounts among the active ones.
Reducing Your Risk
No matter what number of cards you ultimately decide to keep active, there are several things you can do to reduce your risk of identity theft and keep your accounts safe. For starters, when you leave the house, take just the one or two cards you use regularly and leave the rest at home (ideally, under lock and key).
Other protective measures include:
- Scrutinizing your account statements diligently every month.
- Taking advantage of any monitoring services your card providers may provide, including alerts when suspicious activity is detected.
- Checking your credit reports frequently (at a minimum you’re entitled to a free one each year from each of the big three reporting agencies, so that’s one every four months).
- Making sure your mailbox isn’t accessible to random passersby (get a P.O. box if necessary).
- Shredding your statements before discarding them.
- Learning to watch for card skimmers and shimmers, or shoulder-surfing observers, wherever you use your cards.
If you really want to play it safe, you can sign up for an identity protection service like Spokeo Protect. The criminals who steal your identity are not necessarily (or solely) the ones who exploit it, so usually your information is offered up for sale on the sketchy marketplaces of the so-called dark web. If that happens Spokeo will let you know, which means you can put a credit freeze or fraud alert in place and have the chance to prevent most of the potential repercussions before they happen.
Ultimately, your online safety depends on your own vigilance and good safety habits, whatever number of credit cards you decide to carry.