People often wonder how many credit cards is too many. The simple answer is that there really is no one answer. At least, there is no universal answer that applies to everyone. Financial companies do treat each case on an individual basis.

The higher your annual income, the more credit that is generally acceptable for you to have and maintain. More income should, in theory, make it easier to pay off higher debt. However, from the creditors’ perspective, the more credit you have available the higher the risk of building up debt.

What's the magic number?

There is no one number that everyone should stay under. Instead, how much you spend and how much you can pay off is the answer in determining when to say when. To find the right number for yourself there are several factors that should be taken into account. Many of these are specific to you and will give you a different answer than someone with a seemingly similar situation.

How much do you usually spend each month? How much can you afford to pay off every billing cycle? What is your annual income? What other expenses do you have? How secure is your job? Do you have any loans? How high is your interest rate on each card?

The answers to all of these questions will determine your magic number. You will know how many credit cards you can handle while building good credit and avoiding massive amounts of debt.

Choose credit cards carefully

Choosing the right credit card to apply for is also important. Credit card offers are everywhere and not all are created equal. One bad card is more than you should have, so look into the lenders, benefits, rates and fees associated with each offer.

When deciding how much is enough for you it is important to keep in mind your debt ratio. Generally it is a good idea to keep your debt below 50 percent of your available credit. For example, on a card that has a limit of $10,000 you want to keep the balance below $5,000. If you need to make a purchase that would put you over the halfway mark, split it between two cards.

When a lender looks at your credit report and sees a card near its maximum it may make them hesitant. Two cards with more manageable balances are preferable. Setting your target ratio at a lower number like 25 or 30 percent is even better for managing your credit cards. The better you are at managing debt the more prepared you are to handle additional credit cards.

There are two sides to every coin, though. Having too little credit can be just as bad as having too much. When you apply for loans or credit cards with higher limits and better rates, lenders want to see that you are a responsible borrower. This means they want to see that you can handle various types of credit and have a good history of repayment. The better that history is, the better credit cards or loan offers that will be available to you.

Building good credit can be accomplished more quickly with a few different lines of credit. Using one account to build your score will take longer. The key is to determine what number you can handle without becoming overwhelmed. Too little and too much can be problematic, but just the right amount can do the trick.

Other considerations

Retail stores introduce an interesting variable into the equation. Most stores now offer some type of store credit card deals. Most of the time they offer small discounts for opening and using a credit card at their store. It is enticing to apply for these cards and use them, but it is best to stick to one store card. Otherwise, the number of cards and debt you have can skyrocket before you know it.

Opening these credit cards for one purchase and then paying them off and canceling the account is a common practice. Common does not mean it should be done often, however. Length of credit history can be factored into your credit score, so accounts constantly being closed out can sometimes negatively impact your report. So even if you plan to cancel the store card once it is paid off, you still might be passing your magic number.

This number is not set in stone, but rather an estimate. There is some wiggle room depending on the creditor looking at your score and for what purpose. So it is good to be aware of what you are applying for, what they look for, and what you can handle. The object is not to increase this number as much as you can, but to know what it is and manage it properly.

If your credit is handled responsibly the number will increase. Remember though, that just because you can get more credit does not mean you have to, nor does it mean you have to use all of it.

See also: Old credit cards - Cancel or keep?