Stack of credit cards

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That big, fat sign-up bonus is calling your name. Or maybe it’s a tantalizing zero percent offer that makes big-ticket items seem a little more within reach. You already have a couple of credit cards, should you sign up for more?

It depends.

If you’re like the average American — who owns between one and three credit cards, according to a 2016 report from credit reporting agency Experian — you may find yourself considering whether or not to add another piece of plastic to your wallet.

Unless you pay off your bills in full and on time every month, even one card can be too much if you fall behind. If you’re considering applying for a new credit card, first determine your budget and how you’d like to get the most out of owning a new card.

Why have more than one card?

If you have great credit and a good handle on your finances, owning a cash-back credit card can save you money. Using a card that pays a percentage back on all of your purchases is like getting a discount every time you shop. Some of the best cash-back cards offer 1.5 percent to 2 percent cash back. However, if you carry a balance on a cash-back card, the amount you pay in interest charges will likely outweigh the value of any earnings.

Pairing a cash-back card with a rewards credit card can amp up the savings. For example, suburban households may find the greatest value in a card that offers a high rewards rate on grocery and gas purchases. These cards will often have a spending cap on the highest-rate rewards categories, but by pairing them with a flat-rate, cash-back card, you can maximize your savings.

It can be rewarding

For those who travel at least a few times a year, it can make sense to add at least one travel rewards card to the roster. These cards often come with valuable extras like sign-up bonuses, boosted reward categories, and a host of perks like lounge access, free baggage checks or room upgrades.

Points and miles maximizers will often hold several different types of travel rewards cards and spread out their spend on each one strategically, depending on their goals.

It can save you money

If your spending has gotten ahead of your income, you may want to consider a balance transfer card to help you save money on interest payments. If you owe $10,000 on a credit card with a variable interest rate of 18%, over the course of the year you’ll pay $1,800 in finance charges on top of what you already owe. With a balance transfer card that offers 18 months interest free, you won’t accrue any finance charges if you pay down that balance within the promotional period.

There are two reasons when a balance transfer card may not be a good idea. First, many balance transfer cards charge a transfer fee ranging from 3 percent to 5 percent. If the balance transfer fee is more than what you’d save on interest by making the transfers, don’t get the new card. Or, if you don’t think you’ll be able to pay down most of that balance before the zero percent interest rate period is up, there’s no benefit in owning the new card.

Can I have too many credit cards?

It depends on your goals and how you are using your cards. Keep in mind that the more credit cards you have, the more organized and diligent about finances you need to be. Also, every time you apply for a new credit card, your credit score will take a hit from the card issuer’s credit report inquiry. On the other hand, if you have several credit cards and use them sparingly, you can give your overall FICO score a big boost.

The amount of debt you’re carrying is the number one factor affecting your credit score. A good rule of thumb is to have a credit-card utilization ratio of 30 percent or less. This ratio describes the percentage of the available credit on all your cards you have actually used. Keeping your utilization ratio low is paramount to having a good score, which in turn will help you qualify for better rates on everything from a mortgage to an auto loan, even other credit cards.

For example, if you have total available credit of $10,000, the goal should be to never carry a balance greater than $3,000. If you have more than one credit card, and the total balance is spread out over different cards, it could be even better for your overall credit score than having the balance on just one card. This is because credit scoring is also a function of how close you are to your credit limits.

In practice, spreading out debt isn’t likely to be simple and the more cards you have, the more tempted you might be to just charge something else.

What if I have a low credit score?

If you have less-than-stellar credit, it’s a smart move to limit the number of credit cards you own so you’re not tempted to start carrying a lot of high-interest debt.

If you have a thin credit file, or you’re trying to rebuild your credit, start small. Apply for a credit card designed for someone with limited credit history or poor credit. These typically come with lower credit lines and may have higher interest rates than other cards on the market, but if your credit score isn’t great, you may not qualify for a low interest rate card.

By charging a small amount each month, and paying it off every time the bill comes, you can improve your credit score over time. Check your score periodically to make sure there aren’t any errors that could affect your rating.

The bottom line

There’s no one-size-fits-all approach to knowing how many credit cards is the correct number to have. It all depends on your spending habits, your goals and your ability to juggle multiple cards. If you can pay your bills in full and on time every month, and you can keep careful track of your spending, you can benefit from owning multiple cards and using them strategically. Otherwise, it might be best to just keep things simple.

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