Here are the best credit cards today if you are looking for an awesome rewards credit card. There are so many great offers, so how do you decide which ones to get? Let's how many credit cards you should have until it's too late.
One day I was having lunch with a buddy of mine when he whipped out his foot long man wallet to pay the bill. “Whoah!” I said. “Where do you keep that thing?”
“In my man bag, of course!” he replied with pride. Todd lifted up his soft leather Bally bag that probably cost a thousand dollars. “Have a touch,” he said as he tossed it over. Todd's bag was as supple as a baby's bum.
The reason why Todd's wallet is so big is because he has 10 credit cards all nicely color coordinated from top to bottom. The most prestigious cards – the black ones of course – were at the top. But as I looked closer at his collection, every one of his said “Preferred,” “Platinum” or “Elite.”
Temptations To Get A Lot Of Credit Cards
One could call Todd a credit card connoisseur. “I've got a card for every purpose,” told mentioned proudly. “Never leave home unprepared!”
Despite what is probably hundreds of thousands in credit at his disposal, Todd still rents a one bedroom apartment and has less than $80,000 his 401(k) at 35 years old because he's spending all his money!
In fact, he admitted to having around $18,000 in revolving credit card debt spread across seven accounts. At least he's got a nice BMW 650i coupe on lease for $899 a month. Gosh, it seems like only the rich can buy new cars today!
So I got to thinking, maybe the reason why Todd has so little assets for a man making six figures a year is because of temptation from all his credit cards. When there are no cookies in front of me, I never eat desert. As soon as you put out a tray of gooey white chocolate chip cookies at my disposal, it's game over!
The Most Credit Cards I've Ever Had
Some people are completely against credit cards because they've gotten themselves into debt troubles before. How many credit cards should those folks with debt problems have? None. Alcoholics should not hang around in bars.
By only using a debit card or cash, such anti-credit card users help minimize themselves from relapsing into debt. I commend their cold turkey approach, but it's not for me.
I recommend everyone have at least one credit card to build their credit score, use as an emergency, borrow money for free for 30 days, earn rewards points, and minimize the pain of losing cash when you lose your wallet.
How Many Credit Cards Are Ideal For Optimal Financial Health?
The question is, how many credit cards are ideal for optimal financial health. Let's discuss!
The most I've ever had was between the ages of 22-24 when I had five. I thought it was so smart to open up new accounts with 12+ month long 0% introductory APR rates, pay the minimum for the full term and then transfer the balance to another 0% APR credit card. Borrowing money for free is always a splendid thing to do when you are young, poor, and have a lot of time on your hands.
Unfortunately, there's a point where the “spend more, save more” mentality runs out. Notably when it becomes absolutely backwards to keep spending just because the interest rate is cheap. More than anything it felt annoying to always have a revolving balance so I decided to quit the shenanigans and just focus on better spending habits.
Down To Only Two Credit Cards
From 2001 to 2013 I only had two main credit cards: 1) my American Express corporate card and a 2) Citibank ThankYou credit card because I've been a long time banking client.
The reason why I only had two was both physical and mental. On the physical front, I can't stand having a thick wallet. The wallet is always in my right butt pocket for all you pickpockets out there and it's uncomfortable to sit down when things are uneven. The second reason for having only two credit cards is due to record keeping.
By only having one personal card, I was able to comfortably keep track of all my expenses online and make sure I was not going over budget. For example, if I had a $2,000 a month credit card budget, I didn't have to stay on top of numerous credit card balances.
My expenses for the month were essentially my credit card bill + the amount of cash withdrawn from my checking account. Having only one made it much easier to SAVE money.
Track Your Credit Cards Closely
Now that I have a third credit card to earn points for travel, I've got to be a little more diligent about my spending. With a 0% introductory APR, 40,000 bonus points, and the first year's fee waived, I'm reminded of the times when I had multiple credit cards once again.
Now I'm tempted to take advantage of new credit card offers with bonus points. It feels a little like going into relapse!
Just imagine, if I can earn 40,000 rewards points just by signing up and use a credit card to buy a $100,000 Range Rover to earn a total of 240,000 points, why wouldn't I? That's five or six round-trip flights from San Francisco to Hawaii.
Unfortunately, car dealerships usually only allow for a maximum of $3,000 to be charged due to fees they have to pay which cuts into their margins.
The Biggest Risks To Having Multiple Credit Cards
I'm a big advocate of less is more when it comes to credit cards. Let me explain why I recommend keeping the number of credit cards you have to three or less.
1) More Credit Cards = More Temptation To Spend
If you have a budget of $1,000 a month to spend on your credit card(s), it's much easier to limit spending on one card compared to limiting spending with five.
Your mind automatically starts thinking about the various custom rewards points for each card and you charge accordingly just a little more than you should. If you charge even $100 more on average between your five credit cards, you've gone 5% over budget for the month.
Compound the over budget amount over the year and just like that you've got $1,200 more in credit card expenses or debt that needs to be paid off. We can't help but think of each credit card as one powerful spending tool with its own APR rate, fantastic benefits, and multi-thousand dollar credit limits.
Derivative Explanation: I threw a potluck at my house for 20 confirmed guests one year. One of my good friends said she'd make enough spaghetti for 20 people. I told her to just make full portions enough for five people. She looked at me stubbornly and said, “Well what about the other 15 guests?”
I proceeded to explain to her that if all 20 guests made enough full-size portions for 20 people we'd have enough to feed 400 people! She didn't get it and insisted to bring massive pots of sauce and pasta. At the end of the party, she had to lug both massive pots still full of pasta and sauce home. The lesson here is that we get confused with how much we can spend the more spending vehicles we have.
2) Incremental Rewards Diminish
Unless you are a billionaire, you only have so much money to spend a month. Let's say your budget is $3,000 a month and you go from one rewards credit card to three: one for travel, one for entertainment, and another for online shopping.
You must now calculate the incremental rewards you'll earn, given you would have received rewards if you put everything on your one and only credit card anyway. Once you calculate the incremental rewards received, you realize the benefits aren't that much at all since you are not spending 3X more by have 3X more cards. And if you are spending above your $3,000 budget that's no good either.
Derivative Explanation: One friend started bragging about how his investment portfolio was up 18% in 2013. That's a great return for anyone, but guess what? The S&P 500 index is up 18% as well! In other words, my friend created no alpha.
All the time he spend researching and picking stocks was a waste since he could have just bought the S&P 500 ETF SPY and kicked back all year. To maximize your rewards from each card you've got to meticulously deploy your usage. Otherwise, you're weighing down your finances with distractions. Real investors create alpha. Otherwise, you're just a saver. Read: Are You A Real Investor If You Create No Alpha?)
3) Higher Chance Of Getting Into Debt
Credit cards have the highest interest rates for mass consumer lending other than payday loans. With the 10-year interest rate at 3%, the average credit card interest rate is roughly 15%. A 5X spread is enormous! No wonder why millions of credit cards are issued annually.
When you have more temptation to spend with more credit cards in your wallet, you will inevitably increase your chance of accumulating credit card debt.
Just like how we don't bring alcoholics to bars, we shouldn't arm consumers who have a proclivity to overindulge on anything with more credit cards. Undisciplined spending and high interest rates compounded over time have a devastating effect on your wealth.
(Read: The Reality Of How People Get Into Debt – It Just Creeps Up!)
Derivative Explanation: There's a great study that showed a 30% increase in spending per customer once McDonald's started accepting credit cards. One frugal friend I know went from buying two $1 McDoubles for lunch twice a week in cash to buying two $4 Filet O'Fish sandwiches and a large Coke three times a week for the next two years. He no longer plays singles because he went from a svelte 165 lbs to 200 lbs and admitted he's got revolving credit card debt attributed to his fast food addiction.
Here is a post on ranking debt types from best to worse. Do your best to stay out of credit card debt. The interest rates are way too high for your financial well-being.
4) Burden On Your Credit Score
We learned in my article on how to get a 800 credit score or higher that the Amount Owed accounts for 30% of your credit score calculation, while New Credit accounts for 10% of your credit score calculation.
Nobody knows exactly how many credit cards is too many, but one can imagine that after five credit cards, opening up another credit card at the margin will likely hurt your credit score, or at least not help your credit score.
Sure there are plenty of examples of people who have eight credit cards and still have good credit scores. But perhaps they would have even better credit scores if they only had three credit cards.
Derivative Explanation: After three gin and tonics, I'm feeling good. After 10 gin and tonics, please dial 911 and pump my stomach before I die.
Focus On Bigger Picture Financials
Applying for multiple credit cards all the time is an unhealthy use of time. It's like the person who always focuses on the emergency fund and not on ways to make more money. They never take their personal finances higher because they're focused on kindergarten basics.
Everyone should have at least one rewards card given the benefits of travel insurance, rewards points, ease of use, and free interest for 30 days.
My Citicard of nine years is now gathering dust given I want double points on everything with my Barclaycard. If I didn't have a business, I wouldn't have a third credit card. However many credit cards you have, be careful not to get caught in a negative debt cycle or damage your credit score.
Spend your efforts instead on building passive income streams and making more money. If you don't have a highly addictive personality, one to three credit cards is the ideal number for optimal financial health!
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About the Author
Sam worked in investment banking for 13 years at Goldman Sachs and Credit Suisse. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $350,000 a year in passive income.
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I have 48 credit cards, my wife has 44 and two of my sons have total of 35. I managed and created a spreadsheet to manage all these cards. I monitor utilization ratios, make sure that cards are paid before the statement is cut. Total revolving credit line for all cards is 1.9 million my credit score is 823, wife 827 and two of my sons are in 810’s. I do this for travel and cash backs. We’ve traveled all over the world for free with rewards. This is not hard to do you just have to be discipline.
Really old post. The conversation left long ago, but I came here through a google search and suspect others do, as well.
First, since Sam frequently asks, I’m 36 and my net worth is somewhere decently north of $600k, though with most in Vanguard index funds and markets at all-time highs, I take that with a grain of salt. My money was mostly made through savings over my military career.
To the point: I opened my first credit card at around age 18 and maintained only 1 card until around 5 years ago when I opened a 2nd with USAA to increase my limit for the benefits that brings upon my credit score. It’s also nice to separate spending and have a backup. My FICO credit score was 816 when I moved into my latest house 1 month ago. My strategy was to pay off any expenses on the card monthly and I’ve seen a monthly interest charge less than 5 times in all of those years.
The reason this came up now is because I feel I’ve missed out on a big opportunity that I’m now taking advantage of. I just applied and was approved for the Amex Platinum card, which typically has a $550 annual fee, but that’s waived for Active Duty military. With the card, I get $200 in annual travel expenses reimbursed, and up to $200 in uber expenses. That alone makes the card worthwhile. In the coming months, my family friends will help me reach the sign on spending bonus to receive somewhere between $500-$2k worth of points. I’ll treat those points like real money and spend them wisely.
After I’ve reached the Amex sign-up bonus, I’m also planning to take similar advantage of the Chase Sapphire Reserve which waives its $450 annual fee and provides $300 per year in travel expenses. Further, the points earned can be redeemed as cash back with more value per spent dollar than I currently with my USAA cash-back cards. The travel reimbursements alone would take $33-50k in spending on my other cards to match and they are automatic each year. They also come along with quite a few other nice perks and cash-back or cash toward normal travel I pay for anyways. There are other cards like this for the military, and I might start playing the game a bit if it’s worth my time, but I suspect I’ll just stick with these two cards and cancel them once I retire in another 8 years or so.
I’m posting for other military who might come across this post, but I can’t help but caveat that one should use their best judgment regarding whether the access to cards would undermine your spending and saving discipline. If I find that it has affected mine, I will cancel, but since my current $45k spending limits hasn’t affected me, I highly doubt these cards will.
I forgot to mention that we didnt cancel all unused cards togther, it took us a good 2.5 yrs to cancel them all…only because we wanted to maintain at least 745 scores.
When we first got married, in order to boost up our credit scores, we hd to open about 16. All were watched carefully. After 1.5 yrs, we were able to buy a nice house and cars with best interest rates (new cars were 1.65% and 2.75% for the house). After all this we canceled cards that we dont use and keep 2-3 low interest rates ones. My point is that it is ok to open cards to boost up your scores. However, you hv to watch them carefully and live within your means. Those who can control spending should have at least 2-3 credit cards to maintain a good credit score.
The best number of credit cards is however many you can use and pay off, with one low intrest card for a buffer and a personal line of credit to boot. I’m broke but i have the ability to spend 300k and and hold it over for years lol. I’m self employed… we get ripped off at morgage time but if you work it well a good set of cards is invaluable. I run 5. A Canadian Tire gas card… 5k save 35c a gallon if i spend 5k and I do… Amazon.ca visa. points cause i do buy lots of junk on amazon. a Capitol one gold card that is crap but its 20 years old 8k
yep my Netflix card lol. my CIBC visa select is wonderful!15 years old 11.9% no rewards 18,000,00. I carry a ballance here on and off. the mighty CIBC Advantura Infinite Visa my all round point getter i ram 10k a month through this baby. last on the list is my American express Business platinum Charge card. airport lounges Free fast wifi. free in flight wifi. basically i just use the bennifits and only use it in the air port. This thing is just a $650 don’t sleep on a bench for that 11 hour layover.Line of credit 20k CIBC 2.8% I owe 15k here but ,really all I have done is this. Don’t overspend. use every card you have every month pay double pay, tripple pay. I own a 2005 ford focus thats it….
[…] I used to have a Delta Skymiles credit card, an American Airlines credit card, and an AMEX corporate card as part of my arsenal of spending tools. After racking up 130,000 travel miles one year and accumulating roughly 180,000 credit card rewards points, I realized that having three travel credit cards was inefficient so I consolidated to just two. (See: What Is The Ideal Number Of Credit Cards One Should Have?) […]
Ugh, typo. Your credit score is NOT affected negatively by having too many cards.
As a second note, the “free credit scores” available on the internet can be helpful to see trends, but they give no real indication of what your credit score is. It’s a completely different score than what is given to lenders.
Your statements about credit scores are just wrong. Your credit score is affected negatively by having too many cards. It is affected negatively if you have a low average age of accounts (if you open new cards every year, your average age of accounts doesn’t increase nearly as much as it would otherwise each year). It also is affected negatively if you have a high “utilization.” That means that it’s affected negatively after you start going above 10% of your available credit. So if you have $5,000 in credit limits, as soon as your statement is over $500, you start seeing a bit of a negative effect. The closer you come to $5,000, the worse. If your monthly spending is $1,000 and you only have one credit card with a $5,000 limit, this could be a problem. If you have $100,000 in credit card limits, staying under 10% is easy. A lot of people open more credit cards for two reasons: 1) rewards, 2) helps overall utilization. (It is important to know that you should never go over 10% on one individual card either, but being over 10% on just one card out of many is not as bad as being over 10% across all your accounts.)
For the sort of person who is easily tempted by available credit, getting more credit cards is always a bad a idea. So some of your advice is good. But it’s incorrect to say that having more credit cards hurts your credit score. That’s only true if you’re utilizing them too much.
I have 10 or 15, but only b/c I used to chase those promotions and the 0% when I needed it. No need to cancel them or even carry them on me, just use Amex for the exact reasons you mentioned.
That opener was so funny :-)
I have three credit cards. I used to only have one, but I opened a gas card and a travel rewards card earlier this year. I use the reward card and pay off the balance each month because I am allergic to the interest rates.
I did have to reel in my “spending for rewards” after the first few painful balances.
Now, I use a budget app to help me keep track of my spending, earnings, and savings – a great tool for us “general consumers” sincerely interested in attaining financial freedom too. Turns out, watching my savings increase is a lot more rewarding than travel points earned from spending.
Sam, I am getting on a plane today to go to DC. I was reading your post and had to check my wallet to see how many cards I have and I do not have even one cc in there. I know I have had 10-15 cards over the last several years as that is what is listed on my credit score. But I have only actually used x 2 in the last 5 years and have not used a cc in 8 months or so, apparently even to the point where I do not even carry them. I need to dig at least x 1 out before I get on the plane for security reasons (hate to be away from home and rely only on a debit card in case of emergency).
I stopped trying to get points, even travel points, on rewards cards as I found I was spending 20-30% more to get a 2% reward. I found it was best, for me, to just pay cash and try to keep expeditures to a minimum.
The friend I travel with the most uses one rewards card and has no problem letting me know I am not optimizing my spend as I do not get as manay rewards as he does. It is a good conversation and one we have had in several countries. For now, I am staying away from credit.
P.S. I love the Derivative Explanation thing. You have a great, very entertaining, writing style.
Thanks for sharing and glad you appreciate the derivative explanations!
How did you purchase your plane ticket btw if no CC? Debit card?
Yeah, debit.
Like you, I travel to Europe and I always carry a credit card on international trips for emergency but have not used it recently. I do carry a lot of cash which makes the wife nervous. Oh well, there are always trades offs right?
I have three credit cards but really only use two of them. I can’t be bothered with more credit cards than that. I like keeping things simple. Fewer bills to pay and more reward points on the same cards.
I have a bit of cards but because of different card merchants (Amex vs Visa) and different rewards schemes. IE Until PenFed changed their policy, I loved their at-the-time no-fee card that automatically gave me 5% cash back on gas. So I just used that card for gas. Same thing for another card that gives me 2x points on groceries. Then there’s the everyday Delta Amex we use for most purchases. For people who aren’t organized and disciplined with money, I do not recommend this, but if you want to get the most for spending you already do, I recommend having more than one no-fee rewards card (plus your regular fee-based rewards card) if you qualify and pay the balance in full each month and the rewards are worth it to you.
We currently have an SPG Amex earning 30,000 points.
Plus, I have my old Discover card and another old credit card I’ve had opened since college and while I don’t use (except for the occasional small purchase that is paid off immediately), I don’t want to cancel being that they’re two of my oldest cards on my credit record.
If you have decent credit, it’s easy enough to find no-fee rewards cards, so I wouldn’t recommend a fee-based one. Those are only useful if you have high spending levels such that your rewards pay the fee. But for a lot of people, that’s not the case, and you won’t want to encourage extra spending.
Why close them? Just don’t use them. @Insourcelife
I have 4 cards, but been thinking of signing up for several more to get some nice sign up bonuses. Have not really looked at sign up bonuses but been looking more at continued rewards. Currently have a Chase Freedom, Discover, Citi & Williams Sonoma (credit not store card). I get my biggest rewards from Discover, I get 5% back on every Office Depot Purchase I make for work.
Great post, but I really don’t think that credit cards lead to overspending. They may help a little, but the primary cause is the person’s attitude. If credit cards didn’t exist, they would obtain loans. If loans didn’t exist, they would borrow from friends and family.
I have many credit cards for rewards but, because its ingrained in my mentality, I have absolutely no desire whatsoever to spend more than I usually would on any of these cards.
Credit cards can be a great tool to build wealth through rewards, cashback and an improvement of one month’s cash flow. However, if the worker doesn’t know how to use the tool (or messes around with it), it suddenly becomes a lot more dangerous.
I agree that too many cards will affect your spending! It is just too difficult to keep track of everything. Everyone has a different limits though. Some can handle 5 cards and still many others perhaps none. If your goal is to pay the entire balance every month, you should catch on the first month. Unfortunately, that is too late and they spiral down fast!
I see no need “to keep track of everything”. I put all my cards on autopay – thus no chance of things spiraling down fast.
However, I can see how it could happen to someone that does not have ample cash that will allow them to pay all of there charges off in full on a monthly basis.
Do you have a autopay function that always pays exactly the total amount due? Or do you allocate some fixed number every month regardless of balance?
Total amount due of course!
I do this thru the credit card companies website, chase Citibank and American Express.
I have 2 cards that my wife is also on, an Amex with 2% cash back, and a Mastercard with 1% cash back. My wife also has a Discover card she uses for “gifts.” The charges are less than $100 a month, so I don’t worry about it. She also opened a Disney Visa card to get some sort of huge intro discount on a cruise. It does not get used except for small charges now and then to keep it alive.
I have 2 cards in my wallet, a Fidelity Investments Reward Card and a Macy’s card. I get 2% back from every purchase with no limits on the former, and the latter allows me to get better deals when I am forced to buy new clothes. Naturally, I always pay the entire balance every month.
I’m wondering though, do things like store credit accounts count as credit cards? For example, I bought the wife some jewelry and Tiffany & Co, and I did the thing where I put down 25% and pay the remainder off over six months (0% if paid in full over that term). Does that count as a credit card or line of credit (or whatever, show up in your credit report), even though I don’t actually have a physical card?
I believe it does show that you took a line of credit out on your credit report.
I only had 2: AMEX from signing up to get bonus points back 6 years ago, and Citibank platinum (no annual fee, with free travel insurance etc..) which usually is AU$200/year. The AMEX was there just incase the Citibank card could not be used, but over the last 6 years, i only used it once. So i closed it down. The Citibank one earns reward for every $20,000 i get $100 back , i just take cash back credit to the account as i don’t need/want to buy anything else. Never pay any interest ever. For me it is handy, however, more and more merchants now charge 1.5% fee for using credit card, so i use Debit card more now. I think it is self disciplined and also i don’t spend by nature, so even if i have 10 credit cards, it would not be a problem for me at all.
Can’t say I agree. I have 9 and hardly ever have revolving debt and if I do it’s something that I would have bought anyway and, like you said, take advantage of the no interest period. Why not sign up for free stuff all of the time? I have made at least $200 in the past 6 months by signing up and doing what I would have done anyway. Every card has a different purpose and I make sure there is no overlap. I have never paid any interest to any card company and know I never will.
So in my case I will say more cards doesn’t mean more spending. I just recognize the benefit to signing up and getting the bonus and receiving rewards for different things at different times. The margin of benefit is actually quite worth it most of the time. For instance, Chase Freedom and Discover offer revolving 5% CB categories every quarter and they are always different. Sometimes they will offer 5% off in gas or restaurants simultaneously, but not concurrently. I’m those cases, I am making 5X back what I would have had I not had both cards.
Would I recommend my setup for the general consumer? Absolutely not.
Do what I say not as I do?
I just realized I had way more cards than what I said… and had actually made way more money. I’m not proud of that fact though. I definitely need to clip some up and I will admit this article is an inspiration to do so because it is true that its too hard to actually get any significant return without concentrating usage to a few cards.
We have five cards but mainly use two. The Marriott Rewards cards and AMEX cash card. You’re right to say that managing multiple cards will lead you to spend more, as I did that when we were juggling 4 cards.
Good post Sam! I believe we use 1-2 cards regularly after getting the bonuses. We’re funding the FinCon trip and a vacation in January off of them. Earning those free trops can be addicting. This coming from someone who graduated from college with $25K in credit card debt.
That said, I don’t think it’s the credit card that’s the issue – it’s the addiction to spending that’s the real issue. If you can’t keep that under control then having ready access to credit cards will be like that plate of cookies to someone wanting to lose weight – it simply won’t happen. I don’t know if there’s a “healthy” number to have, but if you can manage them and not get into debt then go for as many as you can handle wisely.
I’ve been on both ends of the extreme in terms of credit card usage and now that I am 10+ years of being clean I view it as just being wise about the usage, regardless of the number you have.
The more credit cards one has, the harder it is to control spending IMO.
You’ve given me food for thought, Sam, so thank you. I have three (Amex Blue Preferred for groceries & gas, Chase Freedom for 5% revolving, and the Starwood Preferred, for hotel rewards). I’m pretty happy with the number but I should probably sit down and think about the risks you noted, and see if the juice is really worth the squeeze.
I have many credit cards. Applying for new cards will ding you for inquiries but it will increase your debt to limit ratio. It could hurt your average age of credit, but the big bonus rewards are nice. It doesn’t take much to keep track of it and the bonus is nice for almost no work.