Whether you are 18 or just received your first credit card, you are still 60 years old and your wallet is full of credit cards. It is tempting to charge as much as possible. However, you should beware of such a move. Regular use of credit cards and paying on time can help you build a longer, more complete credit history. But holding any type of balance is risky, especially the large balance associated with your credit line.
We will help you determine how many credit cards you want to use and provide simple steps you can take to reduce your utilization over time.

What is credit utilization?

Credit utilization describes how much credit you use. To calculate utilization, divide the total balance by the total credit limit. For example, if you have a balance of $3,500 and you have $10,000 in available credit, your final utilization will be 35%. Your credit utilization is one of the most important factors a lender uses to assess your creditworthiness - for some scoring models, it accounts for about 20% to 30% of your rating. So ensuring your utilization at a decent level can help keep your credit healthy.

How many credit cards should you use?

But how much credit utilization is too high? We recommend a usage rate of no more than 30%. Since the book balance is a large part of your available credit, it may indicate that you are financially struggling and the lender may be worried that you will not be able to pay it back. It is also important to remember that your usage rate is the percentage of credit you use on all credit cards. In other words, your utilization is calculated by counting the sum of all the balances on all credit cards you hold. So if you have a $2,000 balance on three credit cards and the total available balance is $6,000, then your credit usage is 33%.

Risk of overuse

If you have a high utilization, you may see a negative impact on your credit score. Why? If you have a high credit utilization rate, you may be considered a higher risk and your credit score may drop accordingly, even if you pay your minimum payment on time every month. Let's not forget that the ultimate risk of holding a large amount of credit – credit card rates are usually between 4.9% and 24.99%, or even higher – holding a balance can also result in huge interest payments. Over time, this means less and less money in your pocket.

4 tips to maintain proper utilization

If you want to take advantage of your credit and improve your credit health, it is important to keep your utilization as low as possible. Here are some useful tips.

Open one more credit card. How can a single card in your pocket hurt your score? If you only have one credit card, you can only use 30% of your credit limit to maintain good credit. Having multiple credit cards helps spread the range and helps increase your credit utilization across all your accounts. If you are looking for a new credit line to reduce your credit utilization, first compare the credit card to make sure you get the best treatment for your situation.

Pay more than one bill per month. If your credit card bill has a slow upward trend before the end of your billing period, it may be helpful to submit more than one payment per month. This is usually very simple if you use the card's online bill payment feature.

Ask your credit card issuer to increase your credit limit. Asking your current credit card issuer to increase your credit limit is a good way to reduce your utilization and your efforts are limited. If you have been using credit cards responsibly, this is a great opportunity and it will approve your request. But it's important to remember that this can lead to a difficult investigation, which can cause your score to drop temporarily. Once you have gained a greater credit limit, remember not to increase your spending, otherwise you may offset the positive impact of having a larger limit.

Consider keeping the utilization above 0%. Although keeping your utilization at 0% seems to be the best approach, banks may actually disapprove. Remember, they want to see you using credit responsibly – not completely. Usually, the balance reported to each office is your statement balance, not your monthly carry-over balance, so if you want to pay your balance in full while still showing positive utilization, consider strategically Schedule your payment time.