How many credit cards should I have?

There can be good reasons to hold multiple credit cards, but it’s not always a case of ‘the more, the merrier’. 

There are almost 16 million credit cards in use across Australia, according to the Reserve Bank of Australia (RBA), enough to give three people out of every four their own card. But a Reserve Bank study found only one in three Australians aged under 30 own a credit card, compared to three in five people aged 30-plus. So, clearly, plenty of us own more than one card.

It begs the question, how many credit cards should you have? Are there advantages to owning more than one credit card? Let’s take a look at the pros and cons of having multiple credit cards.

Is there a limit to the number of credit cards I can have?

In theory, there is no formal limit to the number of credit cards you can have. In practice, it all depends on the number of cards you may be approved for by banks and other card issuers.

By law, credit providers cannot sign you up for a credit product, such as a credit card, if it could push you into financial hardship. In particular, a lender is required to check that you can repay the card’s credit limit within three years, and the more cards you hold, the greater the possibility it could be a stretch for you to tick this box.

In assessing your ability to manage a credit card, a bank will look at your income, regular household expenses, any other debts you may have (including credit cards), and your credit report as maintained by credit bureaus such as Experian, Illion and Equifax.

According to the MoneySmart website, for each credit card you’ve held in the last two years, your personal credit report will show the card provider, and the credit limit on each card (not the balance owing). In this way, a credit card issuer can potentially see at a glance if offering you an additional credit card could leave you financially squeezed, in which case you may be knocked back for an additional credit card.

Is it good to have multiple credit cards?

There are potential pros and cons to having multiple credit cards, which can be worth weighing up if you’re thinking about having more than one card.

Potential pros of having multiple credit cards

• The potential to improve your credit score – according to NAB, sensible use of a credit card coupled with regular payments could help to boost your credit score. NAB adds that keeping a credit card account open, even if you no longer use the card, could favourably impact your credit score over time.
• Emergency funds – if your wallet is lost or stolen, or if one credit card is cancelled because your account has been hacked, it could be handy to have an additional card as back-up for emergencies.
• Access multiple reward programs – having several credit cards could be a way to tap into different card reward programs that suit your spending patterns. However, keep in mind that rewards credit cards typically come with an annual fee.
• Ability to segregate spending – having more than one credit card could allow you to segregate and track spending on different items. A couple for example, may use a joint credit card for shared bills, and have separate, individual cards for personal spending.
• Opportunity to tap into bonus offers – card issuers often introduce bonus deals for new cardholders. This could provide an opportunity to take on a card that has zero annual fees for the first year, or cashback offers when you spend above a certain limit in an introductory period.
• Take advantage of card features – a number of credit cards offer extra features such as free travel insurance. This could be a money saver if you’re heading off on vacation, and your current card doesn’t offer this type of inclusion.

Potential cons of having multiple credit cards

• The potential to lower your credit score – making multiple card applications can hurt your credit score, particularly if you apply for several different cards in a short space of time.
• It’s a lot harder to manage multiple card payments – having more than one credit card could make it harder to stay on top of card payments by their due date. A study by Experian found more than a quarter (30.3%) of Australians with 7-plus credit cards had one or more late payments in the previous three months, while only 4.7% of Australians with a single credit card showed any late payments. Late payments can incur penalty fees, and as Experian cautions, falling behind with payments can also damage your credit score.
• The potential to pay more in fees – credit cards can come with a variety of fees, and owning more than one card can mean doubling (or tripling) up on these costs. One way to trim the cost is to look for credit cards that charge no annual fees.

Deciding how many credit cards you should have

There’s no magic ‘right’ number of credit cards to have. Sticking with just one card could have the advantage of keeping life simple, but there could be other reasons to own several cards.

The key to deciding if having more than one credit card is right for you, is understanding your card usage patterns, your ability to stay up to date with multiple card payments – and whether having several credit cards to your name could tempt you to overspend or, worse, leave you battling mounting debt.

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