How many credit cards is “too many”?

When it comes to credit cards, I’m often asked, “how many is too many?” I haven’t seen a concrete limit. In fact, I personally have over 10 cards at any given time. I actually get a new one about every six months – gotta love those intro offers! And the only ones I ever cancel are those with an annual.

So why not go credit card silly like I usually do?

There are a couple penalties for having too many cards, but neither is particularly bad in my experience. First, when you get a new card you will have a temporary (~6 month) ding to your credit score. This is primarily meant to keep you from opening up a bunch of cards all at once. Eventually, that penalty fades away and you are left with a higher credit limit – increasing your overall score. The other penalty I’ve noticed is that some issuers won’t give you a new card if you’ve opened a few within the last 24 months. So, even while your score has recovered, the issuers are wary of your recent history. Again, not a terrible penalty – if you need a new card for some reason, just move on to the next issuer.

People may also be concerned that their average length of credit history will suffer. Yes, it will – each new card, with an age of “0” is going to pull down the average. But new cards today turn into old cards eventually. The more cards you get, the relatively credit score ding for each new card is diminished. Meanwhile, your total credit limit increases, pulling up your score. And, hopefully you also have more years of positive credit history!

So if the financial issues aren’t that bad, what could go wrong? Well, some potentially very serious psychological issues. Some people feel that new credit cards means new license to spend. It very does not! People who have trouble spending may be better served canceling their accounts and cutting up their cards, even if that means their credit score goes down. You know what’s worse than a bad credit score? A lifetime of debt servitude. Know yourself and act accordingly.

So, except for that case of the “over-spender”, opening new cards for the introductory bonuses can mean free income. For my more financial stable and disciplined clients, I suggest opening new cards regularly for the extra $500 to $1000 a year in income. If that extra money is saved and invested – rather than spent immediately – it can help pull people out of debt and into financial independence.