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People tend to be cautious about the number of credit cards they open. More than half (51%) of Americans have either zero or one credit card, according to a credit card study by The Motley Fool Ascent.
Keeping your credit cards to a minimum number is understandable, considering how expensive credit card debt can be. But it’s not the best approach. While you don’t need a wallet full of credit cards, there are several reasons why you should at least have more than one.
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1. You have a backup if one card is compromised
If your credit card is compromised in any way, you’ll need to request a replacement from your card issuer. This could happen if your card is lost or stolen, but it’s also possible for cybercriminals to steal your card number through data breaches or even guessing it through brute force methods.
You’ll still need a way to pay for purchases while you wait for your replacement card to arrive. If you have multiple credit cards, then you’ll have another card to use in the meantime.
2. You can earn more rewards on your purchases
Rewards credit cards are a good way to save money through your regular purchases. You’re going to be buying things anyway, so you might as well earn cash back or points in the process.
While you can do this with one card, combining them is a smart strategy to earn more rewards. That’s because rewards rates vary from card to card. For example, one card may offer 2% back on all eligible purchases, while another may offer 4% on groceries and 3% on gas, but only 1% back on other purchases.
If you got both of those cards, you could use the second card for groceries and gas, and the first one for everything else. You’ll earn more this way than you would by carrying just one of the two.
3. You can earn multiple sign-up bonuses
Earning more rewards on your purchases isn’t the only benefit of carrying two or more rewards cards. Many of these cards also offer sign-up bonuses, which are incentives for new cardholders.
For example, some cards have sign-up bonuses of $200 if you spend $500 on purchases in the first three months. Once again, when you’re spending that much anyway on your regular bills, a bonus is an easy way to take advantage. And if you’re open to getting multiple credit cards, you can earn multiple bonuses.
4. It could help your credit score
There’s a misconception that it’s bad for your credit score if you have too many credit cards. That’s not true, as your number of credit cards isn’t a factor used in calculating your credit score. But there is actually a way that having multiple cards can be good for your credit.
One of the heavily weighted factors in your credit score is your credit utilization ratio — the ratio of your credit card balances to your credit limits. For example, if you have a $5,000 balance and a $10,000 limit, your credit utilization is 50%. That’s on the high side. Lower is better, and the standard recommendation is to try and keep this below 30%.
When you have more credit cards, you also have more credit, so your credit utilization will be lower. Let’s say that you have the same $5,000 in credit card balances, but you have two cards, each with $10,000 limits. Your credit utilization would be 25%, which is much better for your credit score.
5. You get access to more perks
Credit cards offer a lot of perks. Some get you free checked baggage with your airline of choice, or even airport lounge access. Some have a 0% intro APR. Some provide complimentary cell phone insurance coverage when you pay your phone bill with your card.
No single card is going to have everything. But when you open more than one credit card, you can get access to a larger selection of money-saving perks.
It’s easy to get into trouble with credit cards, so you always need to be careful about how you use them. Follow a spending plan and only charge what you can afford to pay back. Pay the bill by the due date, and aim to pay the entire balance every time. These are good habits regardless of how many credit cards you have. If you follow them, then it’s worth having more than one credit card for the advantages this offers.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
