Benefits of Multiple Credit Cards & Tips to Manage Them

Credit cards have become an indispensable part of our financial lives, with 82% of American adults—and nearly all people with incomes of $100,000 or more—owning at least one credit card, according to 2022 data from the Federal Reserve. With the convenience, security and rewards that today's credit cards offer, many people are now seeing the value in using multiple cards. Indeed, the average U.S. consumer has three to four credit cards, according to a 2021 report by Experian.

To determine what the right number of credit cards is for you, it's important to understand the benefits and impacts of using multiple cards—as well as how you can best leverage them—as explained below.

There are several good reasons to open and use multiple credit card accounts, including the following:

Many people give each of their cards a specific purpose, which helps them keep track of their spending for budgeting purposes. For example, you might use one card for groceries, another for dining out, and another for a purchase at your favorite retailer. This can help you keep your finances organized and within budget, and may also reduce the risk of late fees or missed payments, if you can schedule the cards' payment due dates to align with the timing of your paychecks.

Using each of your credit cards for a specific purpose could also make it easier for you to flag when one of your accounts is compromised. For instance, an electronics purchase on a card you use exclusively for groceries should stick out like a sore thumb, allowing you to alert the card issuer promptly. Also, having multiple cards means you won't be left in the lurch without a form of credit while you're waiting for the replacement to your compromised card to arrive, as long as you have available credit.

By diversifying your credit card portfolio, you can take advantage of the wide range of perks and rewards available on your cards. Some cards offer cashback on specific categories like groceries or gas, some provide extended warranties on purchases, while others come with special discounts or experiences. Multiple cards give you the flexibility to maximize these benefits according to your spending habits.

If you're working to pay off a credit card with a high rate of interest, transferring your balance to a new card may help you better manage your debt. That's because some credit cards feature promotional balance transfer offers, allowing you to move existing high-interest debt to a new card with a low or 0% interest rate for a limited time. By using multiple cards strategically, you may be able to minimize interest charges and pay off your debt more efficiently.

It may sound counterintuitive, but in some circumstances you can improve your credit score (e.g., VantageScore, FICO) simply by opening a new credit card account. Why is this the case? It has to do with your credit utilization ratio—the amount of credit you're using compared to your total available credit—which is one of the main factors that determines your credit score. A low credit utilization ratio is best for your credit score, and the extra available credit you get from a new card will automatically lower that ratio—so long as you don't significantly increase your overall debt and you don’t apply for too many cards.

Using multiple credit cards may require extra time and planning, so it's important to acknowledge what's involved before you add any new cards to your wallet. Here are some of the factors to consider:

• Payment Management: Obviously, the more credit cards you have, the more due dates, required minimum payments and account balances you need to stay on top of. If not properly organized, all of this financial data can become overwhelming and lead to missed payments—which can result in late fees or lower your credit score. An easy way to mitigate that risk is signing up for autopayments.
   
• Debt Awareness: While having multiple credit cards can aid in budgeting, it can also tempt you to accumulate more debt than you can handle. The convenience of swiping multiple cards can lead to overspending and the accumulation of high-interest debt. It's critical to exercise discipline and ensure that you only charge what you can comfortably pay off.
   
• Rewards Optimization: Each credit card comes with its own set of benefits. To make the most of your cards, you need to fully understand and take advantage of their features. This includes knowing the details of rewards programs, redemption options, and any annual fees associated with the cards.
   

These “Dos and Don'ts” can help you to get as much benefit as possible from your credit cards.

The length of your credit history is incorporated into your credit score. So avoid closing your oldest credit card accounts, which can shorten your credit history and lower your credit utilization ratio. Keeping those accounts open and active, even with minimal use, can have a positive effect on your credit score, assuming you make your payments on time.

Each time you apply for a new credit card, there is usually a hard inquiry on your credit report. While one or two hard inquiries may not significantly impact your credit score, applying for multiple cards (or other types of loans, like an auto or personal loan) within a short period can be a red flag to lenders, so it's best to space out requests for new credit over time.

Payment history affects your credit score more than any other factor, so it's critical that you make your credit card payments on time, every time. Consider setting up reminders or pre-authorized payments to avoid missing any due dates or sign up for autopay. You may even be able to request a change in billing cycles from the credit card issuers, since aligning the due dates of several of your cards (and scheduling them right after payday) can simplify your monthly financial responsibilities.

Your credit utilization ratio traditionally accounts for nearly a third of your credit score, so it's important not to use too much of your available credit. Most experts suggest keeping your balances below 30% of the credit limit on each card.

To avoid overspending and stay on top of your payments, assign a specific purpose and budget to each of your credit cards. This helps ensure that you will maximize rewards. For example, you might designate a card with great cardholder-exclusive sales as the one to use for your Back-to-School clothes shopping, or flexible financing options for big projects like a home renovation.

Using multiple credit cards can help you stick to a budget, enhance fraud awareness, improve your credit score and get you special perks and rewards. But, like all credit products, they need to be used responsibly to help you achieve your financial goals.