Nothing can beat the convenience and ease a credit card offers while shopping and travelling. A credit card helps you fulfil your wants and needs even when you’re short of funds. Its ‘Buy Now, Pay Later’ feature makes it popular amongst consumers so much that people are now opting for more than one credit card. But is that a good idea? If managed smartly, having multiple cards is not bad for financial health. In this article, we take a look at various aspects of having multiple credit cards.
How A Card Company Decides On Giving You A Credit Card
Lenders check your credit score before sanctioning you a credit card. Your credit score is a three-digit numeric expression of your credit worthiness. Usually, anyone with a score of 750 or above get the best card and loan deals. So a credit card is like an unsecured loan given by the lender based on your credit score.
How Are You Charged
Credit card companies usually offer interest-free credit for up to 45 days and so you can stagger your payments during this duration. If you clear your dues every month before the deadline, you would not be charged anything. But if you miss paying the amount by the set deadline, you will have to pay interest charges as per the lender’s terms and condition. Ideally you should pay the entire due amount in one go as paying only minimum dues makes repayment a long drawn process that attracts a steep interest rate and increases the costs of borrowing. So, whether you have a single credit card or multiple cards, ensure you make the payments on time.
Benefits Of Owning Multiple Credit Cards
– It keeps the credit utilisation ratio lower by spreading your spends across cards. For example, if you use 90% of the credit limit in your single credit card, it will increase your credit utilization ratio. Instead, try to split your spends across cards so that the total CUR is no more than 20-30% for each card.
– It can help you get multiple rewards at different places. For example, one card may help you with lounge access at airports, while another can help you enjoy massive discounts at a restaurant.
– If you make timely payments for all the credit cards used, it will help you maintain a healthy credit score and your creditworthiness will be boosted, allowing you to access loan and credit cards in the future.
– Having multiple credit cards will also increase your credit limit. However, you should responsibly use this limit to spend.
Cons of Having Multiple Credit Cards
You may find it difficult to keep a track of spending done through various cards, and so managing the bill cycle, payments and due dates may look confusing. Since having multiple credit cards increases your credit limit, it may lead to overspending and debt.
How Many Credit Cards You Should Have
If you are eligible, you can own as many credit cards you require. But do note to keep all your credit cards for a longer duration and not close them in a month or too as this may impact your credit score. Also, go for multiple credit cards only after assessing your need, and understanding the benefits of it. Do not be in a rush to own all the cards together, but use them for a period and then weigh the need to buy another one. No matter how many times you apply for a credit card, it will result in an enquiry into your credit history, which affects your credit score. Too many inquires can have a negative impact your credit score.
Having multiple credit cards is perfectly fine if you are using it responsibly by making all the payments timely. Also, when you take multiple credit cards, ensure that each one is offering varied kind of features and benefits.
The writer is CEO, BankBazaar.com