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Q&A: How Many Rewards Credit Cards Should I Have?

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Question: I have an airline miles credit card to save money on travel. I’d like to get a cash back card to save money on everyday expenses. Will it hurt my score if I have more than one rewards card?

Answer: It’s a myth that having several cards will hurt your score. You can have as many cards, even rewards cards, as you think you need without damaging your score. But here’s the key: If used responsibly, having a lot of credit cards will not hurt your score.

Using cards responsibly means that you don’t charge more than you can pay back in full and on time when the next bill shows up. When you have several rewards cards, there are more details that require your attention. Here are a few things to keep in mind:

Don’t get dazzled by sign-up bonuses. Most bonuses have spending thresholds you have to reach before you earn the bonus. So don’t fall for the marketing hype unless the spending requirement works within your normal budget. The key is to buy items you needed to buy anyway. Choose the card that works for you and your style of spending. That’s the way to benefit and even make a profit from your cards.

Higher APRs. Rewards cards tend to have higher interest rates. So if you carry a balance, you’ll pay a lot in interest. This can wipe out a good portion of your rewards. It’s always a good idea to pay your balance in full every month, but it’s truly essential when you’re using rewards cards.

Pay on time or lose rewards. The rewards program for a card usually contains a clause that lets you know what type of circumstances will lead to a loss of rewards. For example, if you pay your bill late, you could lose your rewards as well as end up with a late fee. Know what the rules are and abide by them.

Note the expiration dates. There are a lot of programs that state the rewards don’t expire. But some do expire, so you have to read the fine print to know what applies to each program. And lately, some programs have inserted an “inactivity” clause. For instance, you might lose rewards if you don’t use your card for 12 months.

Understand the rewards program. Each credit card has its own set of rules. So if you have several cards, it’s up to you to understand each program. There could be caps on categories (e.g., 3 percent on groceries up to $6,000) or exemptions to the rewards program (e.g., warehouse purchases don’t count). You can’t take advantage of the rewards, if you aren’t clear about the program.

Plan ahead if you need to apply for new credit. The best rewards cards are offered only to those with excellent credit. So you might feel that you don’t need to worry about your score. Because of this, some people use rewards cards for every purchase and that’s probably fine under normal conditions.

But if you’re planning to apply for more credit anytime soon, such as a mortgage or car loan, you need to think about your credit utilization. A few months before you apply for new credit, scale back and use less than 30 percent of your credit limit on each card.

If you’re on the bubble between good and excellent credit, then use less than 10 percent of the limit on each card. This might bump you up into the excellent range, which means better terms. At the very least, it helps to maximize that part of your score just when you need it to be as high as possible.

Don’t forget to redeem your rewards. This might sound odd, but it happens quite a bit. When folks have multiple cards, they can forget how many rewards they’ve earned and just let them sit in an account. Keep in mind that issuers can change a rewards program with little notice. So stay on top of it and use your hard-earned rewards.

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