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Are three cards too many? Not if you use them wisely

There's no agreement on the 'right' number of credit cards

By Karen Price Mueller

Opening Credits
Columnist Karin Price Mueller
Karin Price Mueller is an award-winning writer with a specialty in personal finance.

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Question for the CreditCards.com expert

Dear Opening Credits,
I've had a credit card for five years, and I pay off the balance every month on time. I believe I have a fairly good credit score. I would like to get another credit card from the same provider and eventually do a balance transfer. Will doing this hurt my credit score since I have been a long standing history, or could my history still be maintained just by applying for a credit card with the same company? I only have the one credit card currently, but I would like to eventually have three -- one for emergency, one for Internet purchases and the other for all other purchases. Is three credit cards too many, and about how much could it hurt my credit score? -- Amber

Answer for the CreditCards.com expert

Dear Amber,
There's no one answer to how many cards are too many. There are lots of variables, including how you use the cards and how you make your payments.

Before we get to your questions, remember this: you say you believe you have a fairly good credit score, but you shouldn't guess. You should know your credit score. CreditCards.com has helpful stories on the ABCs of credit scores, and how to get free credit reports that are actually free. (AnnualCreditReport.com is the place to go for that.)

Let's start with your first question: Will another card hurt your credit score? Yes, but only slightly, and only for a short time period, assuming you make payments as regularly as you have with your first card. That's because your credit score is determined by several factors.

According to Fair Isaac Corp., the people who created the FICO credit score, your score is based on several categories:

  • Payment history -- 35%.
  • Amounts owed -- 30%.
  • Length of credit history -- 15%.
  • New credit activity (including information on recently opened accounts and recent inquiries) -- 10%.
  • Types of credit used -- 10%.

So let's say your current card has a credit limit of $1,000, and you get a new card with a limit of $2,000. You've just increased your overall available credit. Lenders see this as a risk because they know that, if you chose to, you could run up an extra $2,000 in debt. For this reason, your credit score could go down slightly. But if you show a responsible payment pattern with your new card, your credit score will go back up. (The temporary lowering of your score won't make much difference to you unless you're planning to ask for even more credit, such as a mortgage or a car loan, in the next several months.)

Beyond that, a few things in your question made me pause. For one, you say you eventually want to do a balance transfer, but you also say you pay off the balance on your current card in full every month. So what is there to transfer? If you do carry a balance on your current card, and the new card offers a 0 percent interest rate or another low introductory rate, I can understand the attraction. But if you don't have a balance on the current card, any balance transfer offers made by a new card shouldn't matter to you.

Also, you also write about closing your current card, but you're considering a strategy of eventually having three cards, each for different kinds of purchases. If you plan to maintain three cards, it's in your interest to keep the current account open -- unless there's something about the card you don't like, such as a high interest rate or a high annual fee, and you've been unable to negotiate better terms. Your length of credit history contributes to your credit score, and you've had this card for five years. Closing it now would hurt your credit score and could reduce your length of credit history from five years to virtually nil, assuming you don't have any other lines of credit, such as a mortgage or car loan.

On to your final question: How many cards is too many? To this, also, there is no one answer. It depends on how responsibly you use your credit. If you have three cards and pay them all off in full and on time -- and you're not paying high annual fees -- three cards are fine. However, if you don't spend wisely and pay consistently, three credit card accounts might be too much temptation.

So, to summarize, if you plan to carry out your three-card strategy, your best bet may be to keep the current card account open and apply for a second card, then wait six months or longer before applying for a third card. Each time you get a new card, your credit score will go down a little, but once you show you're making on-time payments, your score will go back up.

Before you do anything, however, ask yourself whether you really need additional credit. The more available credit you have, the more you could potentially run up debt in the future. If you don't need the extra cards, don't get them.

See related: The ABCs of credit scores, How to get free credit reports that are actually free, Glossary of common credit card terms

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Published: December 31, 2008


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Updated: 09-30-2016


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