# What is the 'right' number of credit cards?

Is there such a thing as too many credit cards?

One of the most common credit-related questions I'm asked has to do with the "right" number of credit cards. And I'm clearly not alone. If you Google the question "What is the right number of credit cards?" you'll find over 227 million results.

You will also undoubtedly find that a certain segment of the population will always decry credit cards as a source of problems which should be completely avoided. For these people, the perfect number of credit cards is probably zero. For the rest of us, the number is a real number with a real explanation rather than speculation.

For most people, the right number of credit cards equals however many cards they need to function efficiently. That could be 1 card or 10 cards, and there's really no basis for either end of the volume spectrum. No, the right number of cards is more of a credit score question than anything else. So, let's back our way into this thing.

We all know that the optimal debt-to-credit limit, or "utilization" ratio, is below 30%.* That would mean you're well on your way to earning great FICO and VantageScore credit scores. So, in order to determine the right number of credit cards, you'll have to know 2 things: your average aggregate monthly credit card balance across all of your cards, and the aggregate credit limit across all of your cards.

If your average aggregate monthly balance is \$1,000, then you know you'll need at least \$10,000 in aggregate credit limits in order to maintain a debt-to-limit ratio of 10%. But even then, you're cutting it too close. What if you charge much more than \$1,000 in any given month? Your debt-to-limit ratio will spike, and your credit scores would suffer.

If, however, your average balance is a tiny percentage of your aggregate credit limit, then you're done. You already have the perfect number of credit cards. Don't close any of them and don't open any more of them. If that number of cards happens to be 3, or 6, or 9, or whatever, it doesn't matter. What matters is that your usage of credit cards has been completely declawed as a potential hazard to your score, thanks to the limits on your cards.

For those of you who find that your debt-to-limit ratio is much higher because you either charge too much or you only have 1 or 2 cards with lower limits or both, you need to do something—because your credit scores are suffering. You need to either charge less or open a few more cards so your aggregate credit limit figure dilutes your balance to the point that you're almost always under 10%. Call it credit score insurance, if you like.

And for those of you who are all "I don't care what my score is," I can assure you that pretty much everyone with whom you do any sort of financial business does care. Banks, credit unions, insurance companies, utility providers, landlords, cellular, cable, internet, satellite, credit card issuers…they all care and will charge you more or assess deposits if your scores aren't good enough.

So the real question for you is, "Do you like to save money?" or "Does it bother you to pay too much for stuff?" If the answer is yes, then you should take this credit card issue seriously.

Before we part ways, I want to point out that in the entirety of this article, nowhere did it suggest you have any specific number of credit cards. Want to know why? Because there is no right or wrong number of cards, it's all a matter of opinion and personal usage. The credit score exercise above quantifies the issue, which in my mind is a much better way to tackle it.

Topics:
Source:
*Credit Karma, Credit Card Utilization and Your Credit Scores, December 4, 2017
https://www.creditkarma.com/article/CreditCardUtilizationAndScore
Article copyright 2017 by The Simple Dollar. Reprinted from the September 5, 2017 issue with permission from The Simple Dollar.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and are not legally affiliated.

Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

829775.1.0
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

# Get more insights from MyMoney

Just sign up and we'll email our latest thinking every 2 weeks.
We understand that privacy and security are important to you and will only subscribe you to the MyMoney newsletter. See our Privacy Policy.

### 5 hacks to prevent falling into credit card debt

With some helpful hacks, you can avoid spending too much and prevent credit card debt. Learn more here.

### How to pay off debt—and save too

Here's a guide to help you pay off debt while saving for emergencies and long-term goals like retirement.

### 5 hacks to prevent falling into credit card debt

With some helpful hacks, you can avoid spending too much and prevent credit card debt. Learn more here.

### Pay off student loans faster in 2019

Pay off your student loans faster with these strategies to lower debt and live a better life financially. Here are 7 ways to pay off your student loans faster in 2019.