Good Reasons to Use Multiple Credit Cards

Deciding to use multiple credit cards is not a black and white decision. There are good reasons to use multiple cards, and bad ones.

There are many factors to take into account before deciding to add a credit card to your wallet or purse. They include the impact to your credit score, the rewards it offers, its annual fee, and much more.

Depending on who you are, if you heard a friend or family member had 5 credit cards you may either think they are a personal finance wizard or an irresponsible spender.

I definitely fell into the latter camp a few years ago, scoffing at anyone who had multiple credit cards as someone who clearly had no control over spending.

Though, over time, I’ve come to realize I was sometimes wrong (not surprisingly). There are a few really good reasons to own multiple credit cards that can help maximize your money, beyond the typical advantages that one credit card can offer.

Good Reasons to Use Multiple Credit Cards

The first and most obvious reason to have multiple credit cards is in case something happens to one, it’s good to have a backup. If your first card gets lost, stolen, or misplaced, you won’t have to worry about how to pay for future expenses.

The rest of the reasons involve using strategies to help you maximize your money with multiple credit cards. We’ll answer questions like, “When is it a good idea to open a new card to get a sign-up bonus?” And, “How can I increase cash back in a certain category?”

Check out four good reasons to use multiple credit cards below.

1. Implementing a Simple Two Card Strategy

A two card strategy can take many forms. In this case, we’re referring to utilizing one card with rotating rewards and another card with a high everyday cash back percentage.

For example, the Chase Freedom Flex Card and Discover It Card both offer 1% cash back on everyday items, but also offer 5% cash back on certain categories each quarter. These categories range from restaurants to gas stations to groceries, and they change every 3 months.

Then, there are cards like the Citi Double Cash Card and Chase Freedom Unlimited Card. They offer 2% and 1.5% cash back respectively on every purchase. And the Apple Card, which offers 2% back on every purchase made with Apple pay.

Combining these two types of cards allow you to get a minimum of 1.5%-2% cash back on every purchase. Plus, you’re able to earn as much as 5% cash back in certain categories.

The key is to only use your rotating rewards card on the bonus categories for that quarter. And use your other card on everything else to earn the higher 1.5%-2% cash back (compared to only 1%).

This brings your average cash back closer to 2.5% depending on your spending. Not bad for no annual fees.

Pros:

• Higher cash back: You get higher average cash back by combining two no annual fee cards.
• No annual fees: Both cards have no annual fees.
• Simplicity: Only using two, free cards makes this strategy easy to execute.

Cons:

• Smaller rewards: This strategy is best for “low spenders” and it limits your total cash back and sign-up bonus rewards (you are not using any premium cards).
• Limited perks: These free cards have fewer perks (airport lounges access, no foreign transaction fees, etc.) than other annual fee cards.

Bonus: If you pair a premium Chase credit card with their Chase Freedom Flex or Chase Freedom Unlimited, you can further maximize your points and cash back. You can learn more about Chase Ultimate Reward Points here.

2. Travel and Reward Hacking

Jumping straight from a beginner strategy to a more advanced one, travel and reward hacking is not for the faint of heart.

Don’t get me wrong, it’s not that hard to execute this strategy. It just takes a little more focus than a simple two card strategy.

Travel and reward hacking has a few components to it, but the main one involves signing up for credit cards to receive big bonuses. Many cards with annual fees offer big one time sign up bonuses worth $500 or more. You just need to open the card and spend a certain amount of money in the first few months.

For example, the Chase Sapphire Reserve Card is currently (as of January 2021) offering 50,000 bonus points (worth about $750) when you spend $4,000 in the first 3 months of opening the card.

The two keys to executing this strategy are:

1. Staying organized with your cards.
2. Ensuring you leave enough time between opening cards to hit the spending needs to get the bonus and not negatively affect your credit score.

Pros:

• Big sign up bonuses: Bonus values can range from $500-$1000, if not higher.
• Travel Perks: On top of having great sign up bonuses, many of these premium cards also have good travel perks.

Cons:

• Spending minimums: You have to make sure you can naturally spend enough to hit the bonus. It’s not worth it if you start breaking your budget just to get a sign up bonus.
• Credit score impact: Opening credit cards can have a short term negative impact on your credit score. Make sure you spread out your sign ups and pay cards on time to ensure the short term impact does not become a long term one.
• Complexity: Having multiple credit cards can be a lot to manage and you’ll likely need to have a system in place to keep track of your cards.

3. High Spenders Maximizing Category Specific Rewards

If you are a high spender, you may justify having multiple annual fee credit cards to maximize category-specific rewards. This is similar to the first strategy we walked through, but it involves cards with annual fees and bigger rewards.

At the end of the day, understanding if this is the right strategy for you is a math exercise. You can check out the annual fee vs no annual fee example in this post to help get an idea of how to calculate if two annual fee cards are right for you.

For example, the Chase Sapphire Reserve Card has great travel rewards. On the other hand, the American Express Blue Cash Preferred® Card has a really high grocery reward. Combining these two cards could provide a positive payback despite the fact that they both have annual fees.

This credit card tool can also help you analyze the value of getting a new card and ensure that every card you add has a positive payback.

Pros:

• Higher rewards: If you play it right, you’ll have multiple cards all providing you with higher rewards.
• Perks: These premium cards usually come with a couple of nice perks (outside of the direct, monetary rewards).

Cons:

• Multiple annual fees: You’ll have to continually analyze whether the higher rewards offset the multiple annual fees you’ll be charged.

4. No Annual Fee Bonuses

Last but not least, is the simple strategy of collecting no annual fee bonuses.

While travel and premium cards offer bonuses in the range of $500-$1,000, no annual fee cards offer modest bonuses of $100-$300. The upside is that the spending amount you need to obtain the bonus is usually much lower.

For example, the Chase Freedom Flex Card is currently (as of January 2020) offering a $200 bonus when you spend $500 in the first 3 months. This is a much more obtainable bonus for someone who does not spend a lot of money each month.

Pros:

• Easy to obtain bonuses: The minimum spending needed to obtain these bonuses are much lower than premium cards.
• No annual fees: There is little need to worry about canceling credit cards because they do not have annual fees attached to them.

Cons:

• Limited upside: With the easier to obtain bonuses comes smaller payouts.
• Credit score impact: Opening credit cards can have a short term negative impact on your credit score. Make sure you spread out your sign ups and pay cards on time to ensure the short term impact does not become a long term one.

Bad Reasons to Use Multiple Credit Cards

Of course, there are also bad reasons to have multiple credit cards. Here are a few of them to avoid.

1. You’ve Maxed Out All of Your Credit Cards

Opening another credit card as a short term move to obtain more credit is usually a bad idea. Credit cards typically have huge interest rates and leaving balances on cards unpaid can lead to a lot of debt.

Sometimes, it’s necessary for rare situations to open a new credit card.

If you’re in between jobs or trying to get a new business off the ground, you might think opening a new credit card is needed to keep you going. Though, there are usually better and less risky solutions than just continuing to open and max out credit cards with no short term plan to pay anything back.

Pros:

• More short term spending power: The one obvious upside is that you will get more credit in the short term. This comes with some large tradeoffs though.

Cons:

• Huge interest rates: Unpaid credit card balances carry huge interest rates, which can lead to your debt continuing to grow at an extremely fast pace.
• Credit score impact: Not paying credit cards on time will have a big, negative impact on your credit score. Not to mention the negative impact of opening new cards (through hard credit checks).

2. To Increase Your Credit Score

Opening credit cards just to increase your credit score is also usually a bad idea.

Sure, if you have one card and want to open a second no annual fee card as a backup and to increase your credit limit, it’s not necessarily a bad idea.

But opening multiple cards (or an annual fee card that doesn’t make sense for you) just for the reason of increasing your credit limit and credit score is a bad idea on its own.

Pros:

• Increased credit limit: An increased credit limit means your credit utilization will be lower (if you don’t change your spending habits), which is a good thing for your credit score.

Cons:

• Hard credit check: Opening a new card will actually have a short term negative effect on your score (because of the hard credit check) before it has a potential long term benefit (because of the increased credit limit).
• Bad credit cards: Employing this strategy on its own without thinking about any of the good strategies above runs of the risk of opening a bad credit card with a high annual fee that does not pay itself back with rewards.

Ready to open a new credit card? Check out our post on how to choose a credit card or our credit card tool to make sure you are opening one for a good reason!

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.