How Many Credit Cards Do You Really Need?

If you’re like a lot of people, your wallet is lined with credit cards. Maybe you have one you use for your daily expenses and another you use to fill up your car with gas. You may have other ones that you use for getting discounts on purchases at your favorite department store.

The average U.S. consumers carries about three credit cards. But how many credit cards do you really need?

When you consider the risks and rewards of carrying plastic, it’s all about understanding your individual spending habits and needs.   

Here’s an explainer:

The benefits of a credit card

If you’re financially responsible–meaning you pay off your balance each month and on time–a credit card can offer many benefits. These can include letting you conserve your cash, giving you a float until your monthly payment due date as well as cash back, airline miles, and other rewards.

Many of the major credit cards also come with a lot of perks like purchase and price protections, lost luggage insurance, and more.

Another plus: Credit cards can provide an ongoing spending tracker that’s always available online.

“A credit card is one of the greatest financial tools if it’s used correctly,” says Bill Hardekopf, the chief executive of Lowcards.com, a consumer resource for credit cards.

How many credit cards do you need?

Generally speaking, the number of credit cards you should have depends on your credit history and how responsible you are about managing your credit cards. What’s right for one person isn’t necessarily right for another, so there really is no magic number.

Having more than one credit card account can help you maintain a healthy credit profile, as long as you’re responsible with your spending and payments.

However, most financial experts agree that you do need more than one credit card, and many will tell you the ideal number is two or three.

Your “daily driver.” Your primary card is the one used exclusively for daily purchases such as groceries, gas, and household items, as well as other major expenses like vacations, automobile and home repairs, and recreational activities. Shop around for the cards that don’t have an annual fee, offer an ongoing average APR of no more than 13%, and that offer the best rewards and perks such as cash back and travel rewards.

A backup card in case of emergencies. If your primary card is maxed out, stolen, declined by the card issuer due to potential fraud, or lost, you can still use your backup card to make purchases. Having a reserve card also comes in handy if your primary card is not accepted at a particular merchant. (That’s usually not an issue for Visa and MasterCard, but it can be the case for Discover and American Express cards).

What about retail/store credit cards? Retail store cards should only be opened if you’re absolutely certain you can pay off the balance in full, every month, experts say. On average, these cards have the highest interest rates, and they can get you into serious debt very quickly. They may tempt you to take advantage of retail coupons and and other perks that come with using your credit card, which can cause people to purchase items they don’t need. Often, the short-term savings aren’t really worth the headache of managing additional cards.

Credit cards and your credit score

Having more than one credit card account can help you maintain a healthy credit profile, as long as you’re responsible with your spending and payments. However, applying for a number of new accounts in a short period of time will probably hurt your FICO score more than applying for a single new account. That’s because multiple applications in a short period of time can suggest you’re a riskier borrower, or that you’re experiencing financial trouble.

Additionally, consumers with a longer credit history will see the age of their oldest account reflect positively on their FICO score. Banks want to know what kind of borrower you are, the risk that lending to you poses, and that you have a long and well established credit history. For these reasons, experts recommend keeping a few older credit card accounts open, even if you don’t use them. Some people will keep one or two older accounts open and just put the cards in a file and forget about them.

The exception to the rule

If you’re a new credit card user, you should only open one account to establish credit and learn discipline, Hardekopf says. This account will help you learn how to use a credit card properly, including knowing the due date, understanding the minimum monthly payments, and hopefully how to pay off the card each month in full.

The bottom line is this: Understand yourself and learn how you use credit. “If you’re new to credit, tread lightly until you know your spending habits,” says Adam Jusko, founder of CreditCardCatalog.com, a credit card comparison and news site.