In theory you can have as many credit cards as you can afford and your credit score will allow, but how many should you have?
Credit cards are a useful financial tool to have in your wallet as they can increase your spending power when you need to or give you rewards back as you spend.
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But what is the right number of cards to have? Here are some basic facts you should know:
- The UK average is one or two credit cards per cardholder
- Too many cards could negatively impact your credit score
- Having no credit card history could also hit your credit score
- There is no right amount of cards to have: it depends on your ability to meet repayments and manage balances
- Different card types offer different services: consider the services you need and that you’re unlikely to need more than one of each type
- Keeping one card for the long-term (over a few years) can improve your score
Is getting another credit card a good idea?
There is no right or wrong amount of credit cards to have, it depends on your financial circumstances and credit score.
However, there are a few questions you should ask yourself before you get another credit card:
- What are the benefits of this card and do you need them?
- Can you afford to add another monthly payment to your existing financial commitments?
- How much unsecured debt do you already have, and are you worried about it?
Credit cards and your credit score
Your credit score is used to determine your eligibility for credit cards, loans and mortgages, and the number of credit cards you have will affect your credit score and having too many can be a problem.
Paradoxically though, having no credit cards can actually be a problem too as you’d have no borrowing history.
Having long-term relationships with credit card issuers, which show responsible borrowing and punctual repayments, will give you a good credit score.
Conversely having no credit cards shouldn’t actually damage your credit score, but it wont help it either.
In theory there is nothing wrong with having several credit cards and provided you don’t miss any monthly repayments on them, your credit score should remain healthy. But the more cards you have, the more risk there is of missing a repayment and damaging your score.
However, having credit cards which have never been used may also raise eyebrows with lenders in the future. If you have access to thousands of pounds worth of credit that you don’t use, it might lead to lenders being concerned about why you’re applying for more credit.
What’s the typical amount of cards to have?
It’s common for people have more than one credit card, but by the last estimates by the UK Card Association the average is 1.7 credit cards per cardholder in the UK.
Whether you have multiple credit cards, or no credit cards at all, depends very much on personal circumstances and what you are spending money on and where you are spending it.
What credit cards should I have?
You don’t need to have any cards in your wallet and many people get by without them, but they can be useful depending on your needs.
There are a number of different of credit cards types, each designed to provide a different service. Realistically you’re not likely to want more than one of each type at any given time.
0% purchase cards
0% purchase credit cards allow you to make purchases online and in most stores. You can avoid paying interest on balances for anywhere between three months and two years.
This effectively allows you to borrow money for free in the short term, but watch out – once the 0% interest period ends debts left on the card will be charged high interest rates (typically somewhere between 17% and 30%).
If you’re not careful about paying off your balance a 0% purchase card could end up costing you a great deal in the long run.
It’s not wise to have more than one of these in your wallet because of the temptation of over-spending the ‘free’ money during the 0% period.
0% balance/money transfer cards
By transferring your existing credit card balance (or overdraft debts) to one of these cards you can avoid paying interest on your debts for anywhere between three months to three years. But transfer fees of around 3% of the value of the balance typically apply.
- Balance transfer cards can be used to clear credit card debts (but not between the same lender, so you can’t move a balance from an RBS purchase card to an RBS balance transfer card for example)
- Money transfer cards can be used to get a cash loan to clear overdrafts or other debts
Like 0% purchase cards, once the 0% period expires you will be paying a high rate of interest, so make sure you have a plan in place to pay off your balance before the 0% introductory offer ends.
Also, make sure not to miss any monthly repayments: many cards will lose their 0% interest if you miss repayment.
How many transfer cards you should have is a question of working out the amount you can save by avoiding interest on your debts against how much it will cost you to transfer your debts to a new card.
You also need to think realistically about a repayment schedule and how disciplined you are with managing your finances, if you’re good at meeting all your repayments and repaying balances before 0% periods expire then you could consider more than one of these.
However, if you regularly miss repayments and don’t pay off debts within the 0%, then it’s prudent to limit how many balance transfer cards you have, or consider a debt-consolidation loan.
Rewards & cashback cards
These cards are aimed at those who can pay off their balances in full each month – they offer rewards such as Avios points or cashback on your spending.
If you can afford to pay off the balance on multiple cards in full each month then having a few reward or cashback cards isn’t a bad idea, but you should think about the benefits you want receive for your spending.
Bear in mind that some of the cards that offer the best rewards are premium cards that charge fairly high APR or have a big annual fee, so these cards are only worth adding to your wallet if want, and think you’ll use, the benefits.
Low APR credit cards
Low APR cards are useful if you want to have one credit card and you expect to do sustained borrowing on it over several years.
An APR between 6% and 12% makes borrowing relatively cheap, and you don’t have to worry about your interest rate suddenly shooting up.
This is a card you can keep for a few years to show long-term financial relationships, which can count in your favour with certain lenders.
Credit building cards
However, as a consequence of being available to riskier cardholders the APR is often very high (around 30% to 50%), so you need to be careful about paying back your balances or debts could end up spiraling.
Ideally, you won’t have any credit building cards, if you do, you don’t really want to have more than one at a time as you should focus on managing one card until your score improves.
What cards to cancel?
As a general rule it’s good to stop using, if not bin, any cards with expired 0% interest periods.
The same rule applies to credit builder cards once your credit score has improved and you can switch to cards with a lower APR or more competitive rewards.
What cards to keep?
There are cards you’ll want to have a long term and some that are useful for a short-term period of around a year or two.
You want to keep at least one credit card for a number of years, as long term financial relationships should reflect favourably on your credit score and some lenders are more likely to offer you credit.
Other than this card, you could keep the cards that offer you rewards you actually want and use in return for spending on them.
Cards for the short term:
There’s nothing wrong with having a 0% purchase card in your wallet, but you should honestly think about when you will most need a short term interest free credit injection.
While you can’t plan for everything and it could take as long as a month to get a 0% card, it’s still a good idea to keep your credit score clean and save applying for one when you really need it. The same applies to 0% balance transfer cards.
Of course, you could also be a ‘rate tart’ and flit between 0% offers never paying a penny in interest, but this requires you to be disciplined and on top of managing your finances.
If you’re good at juggling card balances between 0% deals you could even make money by ‘stoozing‘, but this can be a risky and complex plan.
How to cancel a card
Whilst it might feel liberating and a good way to limit your risk of being a victim of card fraud, cutting up your plastic card does not cancel it.
To cancel your card you need to get in touch with your card issuer and request you wish to close your account with them. You will need to clear all your balances on the card (or transfer them to a new card) and pay any outstanding fees.
It’s sometimes worth doing this as the threat of you leaving may prompt your card issuer to offer you a more competitive deal.
Often it seems like all the best credit card deals go to new customers and if your card issuer isn’t offering you a better deal you could close an old card to go after a better new deal.
Typically it will take around six months after closing a credit card account before an issuer considers you a new customer, but this period could be shorter or longer depending on the credit card company you’re dealing with.
- Credit reports: the uSwitch guide – All the facts you need to know about credit reports in the UK
- 3 tips on the credit card pre-approval process – See if the pre-approval process can really help your chances of getting a credit card
- What can I use my credit card for? There are some things you should definitely not pay for with a credit card
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