Usually, when a person acquires a lot of something – cars, clothes, baseball cards, whatever – we assume it means they love that thing. Not so with credit cards.
New CardRatings.com survey data show that customer satisfaction with credit cards is lower among people who have a higher number of cards than those who have just a few.
That’s something to think about next time you’re considering a credit card offer. More isn’t necessarily better.
Certainly, there are benefits to having more than one credit card. However, it’s also important to know when to stop. Making the right choices is more important than simply adding cards.
How the number of cards relates to credit card satisfaction
CardRatings surveyed over 1,600 credit card holders to determine if owning more cards correlates with higher satisfaction. Specifically, survey respondents were asked this question: Are you satisfied with the credit cards you currently have?
Response choices were:
1 = very unsatisfied
2 = unsatisfied
3 = neutral
4 = satisfied
5 = very satisfied
Among people who have one to four credit cards, the average answer score for this question was 4.2. So, people with one to four credit cards are typically satisfied with their choices, and leaning slightly towards very satisfied.
In contrast, among people with five or more credit cards, the average answer score for this question was 3.7. That means people with that many credit cards are typically a little less than satisfied with their choices.
Why less credit card satisfaction with more cards?
There are a few possible reasons why customer satisfaction declined among people with more credit cards:
- It may be a sign that they initially made the wrong choices. The very fact that they kept adding cards suggests they weren’t satisfied with the ones they had. After all, young people using credit for the first time often are not familiar with credit card features and terms. They also may not yet have figured out how they’ll use a card, so they’re not in a good position to choose one that suits their needs.
- Some consumers with a lot of credit cards may be less discriminating about the ones they choose. After all, the survey found people with as many as 13 different credit cards. In some of these cases, people may have responded to a credit card offer without really scrutinizing how competitive the terms are and how well the card fits their needs. In particular, this may tend to happen when cards have sign-up bonuses – a customer may be attracted by the initial bonus, only to be disappointed by the card in the long run.
- Needs change over time. A card that suited the needs of a single person just starting a career might not be as good a fit for a middle-aged high-earner with a family. Also, people with more established credit records may be able to qualify for different cards over time, giving them new choices.
- It may simply be that the law of averages means that the more credit cards you have, the more the risk of having a bad experience increases.
Whatever the reason, the responses underscore the importance of thinking carefully before adding any credit card to your lineup.
What is the optimal number of credit cards?
So, if people with more credit cards are generally less happy with them, what’s the right number of credit cards to have? In fact, why not just stop at one?
While having too many cards isn’t always satisfactory for some people, there are some good reasons for having more than one:
- Back-up. If one card gets declined for any reason, it’s good to have a back-up in your wallet you can go to so you’re not caught short.
- Optimizing rewards vs. minimizing interest. The best card to use might vary according to the situation. When you expect to pay your balance off at the end of the month, it might make sense to use a card that offers the best rewards. On the other hand, if you don’t expect you’ll be able to pay off the balance any time soon, using the card with the lowest interest rate is probably a better choice.
- Different types of rewards for different uses. Rewards may vary according to purchase categories. Also, some cards offer rewards for specific purposes, like travel. You may want to choose which card to use tactically, according to what you’re buying and your future plans.
The optimal number of credit cards for you depends on your credit card usage. The main thing is to choose them thoughtfully, having a role for each one.
➤ SEE MORE:How many credit cards should you have?
Drawbacks of having too many credit cards
While it often makes sense to have multiple cards, the survey results are a reminder that it isn’t always a case of “the more the merrier.” Here are some drawbacks to having too many credit cards:
- Security risks. In these days of identity theft and data breaches, each additional card may open a new door to scammers.
- Payment management. Organizing your monthly payments can get a little confusing with several credit cards.
- Potential impact on fees and minimum payments. Credit cards have minimum monthly payments, and some have minimum fees for various things. As you spread your credit card usage among more and more accounts, those fees may represent a higher percentage of your balances and transactions.
- Impact of multiple credit cards on credit score. Opening a new credit account can ding your credit score, so think carefully before adding a card.
➤ SEE MORE:Does getting denied for a credit card hurt your credit?
Consider your situation before closing a credit card account
If you’ve concluded that you have too many credit cards, the answer may not be as simple as closing a few accounts. Here are some things to think about first:
- The age of your credit accounts is a factor in your credit score. So, shutting down older accounts could hurt your credit.
- Another factor in determining credit scores is credit utilization. This measures the percentage of your credit limits that’s currently in use. If you close accounts you lower your total available credit, so that percentage is likely to go up. A higher credit utilization ratio can be bad for your credit score.
- Will your remaining cards meet your credit needs? This is a function both of the total amount of credit you use, and the things you use it for.
If you suspect you may have too many credit cards, the best solution for your financial health may be to start by sidelining some of them. That means taking them out of your wallet and putting them in a safe place at home. That will allow you to see if your remaining cards meet your needs.
Then, if you conclude you don’t miss some of the sidelined cards, don’t cancel them all at once. Pick your spots, spacing out cancellations over time to reduce the impact on your credit score. Start with cards you no longer use that charge an annual fee. You might also consider downgrading your card, instead of canceling the account altogether.
This gradual approach will allow you to reduce your credit cards until you arrive at the number that’s just right for your needs.
➤ LINK LABEL:Should you cancel credit cards you no longer use?
