How many credit cards is too much? How often should you apply for a new line of credit, especially if you want to take advantage of welcome bonuses and travel rewards?
In general, we recommend that you wait three to six months between credit card applications, but there is no limit to the number of credit cards you can have in your wallet, especially if you know how to use it. these cards responsibly.
“Knowing how credit cards work, knowing yourself and knowing what you can handle,” said Luke Thomas, a 27-year-old public relations manager. Thomas applied for his first credit card at age 19 and has since opened a total of 24 credit card accounts. Currently, 16 of these accounts are still active. Thomas used his credit cards to build up excellent credit, fund a vacation to Paris, and book free flights for an upcoming trip to Puerto Rico.
Here’s what he learned along the way, plus some tips and tricks that might help you when applying for your next credit card.
Build your credit as early as possible
Thomas opened his first credit card at age 19, but he started building his credit history several years earlier.
“I started building credit at a younger age than my peers,” Thomas said. “When I was 15 or 16, my mom added me as an authorized user on one of her credit cards so I could access a line of credit if I was in an emergency while driving.” Since his mother used to use credit responsibly, Thomas relied on this story to start building his own credit history before he even had his own credit card.
This gave Thomas an edge when it was time to apply for his first credit card. “I was accepted with no problem for the Discover it® Student Cash Back,” he told us. “The Discover it Student card is a great way to build credit because it doesn’t give you an exorbitant credit limit. “
By making small purchases on his Discover card and paying for them, Thomas quickly learned how to use credit as well as take advantage of Discover’s cash back rewards.
How to start building credit
If you want to build your own credit as quickly as possible, here are three tips to get you started:
Learn how to maximize credit card bonuses
Once Thomas started using his own credit cards, he realized that by using the cards strategically, he could basically make money in the form of rewards. While many savvy cardholders strive to optimize reward categories for spending on certain purchases, Thomas favors cards that offer bonus rewards, especially welcome bonuses. “I read a lot on websites and forums,” he said, “I learned strategies to take advantage of credit card bonuses without going into debt.”
Thomas started by maximizing the referral bonus offered by his Discover it Student Cash Back credit card. “They would give away $ 50 at the time in rewards,” he explained. “I asked a lot of my friends in college to apply.”
“When I was in college I opened two different cards and saved all of my bonus rewards,” Thomas said. “Then I went to Paris as part of a graduation trip. My family helped me with the plane ticket, but my pocket money came from credit card bonuses.
Since Thomas’ strategy is all about getting bonuses, he only spends one or two cards at a time. “I put all my spending on the card that has the bonus I’m trying to get,” he explained. “If I’m in between welcome bonuses, I like to put my spending on a 2% cash back card.”
He also prioritizes credit cards that help finance future trips. “Right now I’m using a card that earns Delta SkyMiles because I won’t be tempted to use my rewards for a credit on my statement. “
The key is to use a new credit card to cover the big expenses you’ve already budgeted to meet spending requirements for the bonus without overspending. “Find ways not to spend more money, but to charge more on your card,” Thomas explained.
For example, Thomas was able to earn several credit card bonuses by putting his rent payments on his credit card. He also paid as many bills on credit as possible and volunteered to pick up the bill when he and his friends were out dining. “I would put it on my card and they would refund me.” “
Know your limits and stick to them
How does Thomas manage multiple credit accounts? It all comes down to understanding your credit, knowing your limits and avoiding interest.
Understanding Your Credit Score
Thomas has done extensive research on the use of credit cards, as well as how credit scores work. “People think having a lot of credit cards is bad for your credit score,” Thomas said. “You may take a hit when you apply, but as your credit utilization rate improves, your credit score should go up. “
Thomas’ credit rating recently dropped from 804 to 746 after a few of his unused accounts were closed by lenders due to inactivity. While this minor downgrade in his credit rating is unlikely to affect Thomas’ ability to apply for credit in the future, it is a potential consequence of balancing multiple lines of credit over time. times. In Thomas’ case, the rewards he earns on his credit card accounts make the whole process worth it.
“I just booked a trip to Puerto Rico with my boyfriend,” he explained. “We are leaving in March. He also opened a card, which allowed us both to get free plane tickets and have miles left for another trip.
Stick to your limits
“I know my limits, and if I put money on multiple cards, I quickly lose track of how much I’m spending,” Thomas said. “I think people automatically equate credit cards with debt,” he explained. “Know your limits and be in control. If you’re not the type of person who can have 24 credit cards and not be in debt, this isn’t for you.
Thomas no longer has 24 active credit accounts. As of this writing, he has 16 open credit cards, but he canceled three cards because they had annual fees. Although some cards have been closed due to inactivity, Thomas makes sure to keep his oldest credit accounts active to maintain a longer credit history.
“With my older cards, I make sure I automatically pay one or two bills so it doesn’t affect my credit history,” he added.
Avoid interest as much as possible
Thomas also makes sure to pay off his credit card bills in full each month to avoid going into debt. “Interest is eroding the point of bonuses,” explained Thomas. If you’re tempted to carry the occasional balance on your credit card, consider how the interest you’ll pay on your balance will reduce the rewards you’ll earn on the card. Then ask yourself if there is a way to pay off your balance in full before it starts to accumulate interest and before it turns into credit card debt.
Is a multi-card strategy worth it?
If you follow Luke Thomas’ lead and learn how to handle multiple credit cards responsibly, you can earn valuable sign-up bonuses, enjoy credit card rewards, and redeem those rewards for airline tickets, credit on statements and more. You might even be able to fund your next vacation with credit card rewards or use those rewards to cover the costs of a trip around the world.
If you plan to buy multiple credit cards, consider what you hope to get out of each line of credit and how you can achieve your goals without earning credit card interest or incurring credit card debt.