I get this one a lot.
Just yesterday a friend of mine sent me an email regarding this very idea: that having too many credit-card accounts is bad. No doubt that my friend had been taught this lesson by a well-intentioned family member or friend. However, it's been my experience that having a lot of accounts does not mean that you're in trouble -- or on your way to trouble.
I have more than 15 credit cards. My credit score has never been better. What's more, all of these credit cards give me plenty of options. Think about it for a second. If you had just one card -- with one creditor (Citibank, for example) -- what would you do if Citibank raised your interest rate to some outrageous figure? Worse, what if you were carrying a significant balance on the card (as many Americans likely do)? Assuming that you had a $5,000 limit, and you were using $4,000 of that limit, you would be using some 80% of the credit limit. I'd be willing to bet that your FICO score, because of that kind of utilization, would not be strong enough to allow you to quickly apply for a new card (with a different creditor) in the period of time that would be necessary for you to avoid the impact that the new interest rate would have on your balance. Instead, you'd be stuck -- even if temporarily -- with a rate that packs a wallop in your pocketbook.
However, for those of us who believe in diversifying our credit-card holdings, we've got plenty of options in reserve. Indeed, I have cards with Chase, Citibank, Nordstrom (a great creditor, by the way), BMW, NASA, Pentagon Federal, HSBC (Saks Fifth Avenue Mastercard), Juniper, and Bank of America. All of these options mean that I don't have to worry about a particular creditor going psycho on me. Any creditor that pulls any funny business on me gets thrown in the sock drawer (timeout, if you will) until I decide it's time to use it again.
The trick to accumulating several cards, though, is doing it judiciously. Don't run out and apply for a host of cards on the same day. That's just plain stupid. Instead, get a few cards each year. Before you know it, your portfolio will be diversified. What's more, spreading out your applications over a period of time will also help keep your credit score intact. Applying for a bevy of cards at once is almost certain to result in a lower score and some denials as well. That's because the average age of your credit history is worth 15% of your FICO score. Thus, be smart when you begin to add new holdings to your credit-card portfolio.
Does having too many accounts really equal bad news? That hasn't been my experience at all. I've been able to diversify my card holdings without any trouble at all.
The real trouble that most people have is that they carry too much credit card debt. Having a host of cards with no balances, but plenty of usage, isn't a cause for concern.
Mom and dad were well intentioned when they gave us tidbits about credit -- but when it comes to credit cards, they missed the boat when they told us that having just one or two cards was all that we'd ever need. Tell that to the guy who only has one card and no options -- and very little available credit. If you ask me, that's the person who is playing dangerously.
Me? I'll take an option every day of the week, thank you very much.