A credit card is a spending tool that can also help you save money through offers available in terms of discounts, cashback and reward points on transactions. Credit card offerings vary from card to card and company to company; tailored to attract customers with different shopping preferences and habits. You may be holding more than one card, giving in to these attractive offerings. While this could expose you to a number of benefits, at the same time, you need to have greater financial discipline to use multiple cards responsibly.
Benefits Of Having Multiple Credit Cards
By having multiple credit cards, you can enjoy a wider range of benefits. For example, one card can give you cash back on shopping at a particular mall or on booking a flight ticket etc. and another may get you free access at airport lounges.
Using multiple credits card also helps you to keep the credit utilisation ratio low by distributing the expenses across cards. Low credit utilisation ratio ensures that your Credit Score is not impacted negatively despite higher gross spending.
On the flip side, keeping multiple credit cards can require careful tracking when it comes to bill payment and handling EMIs. You may find it difficult to remember the bill and EMI dates as it may vary for all the cards. If you fail to pay the bill of any credit card on time, it may negatively impact your credit score.
Multiple credit cards increase your spending capacity, but you should be prudent while making a choice between the necessary and irrelevant ones. Spending more money than your repaying capacity may cause financial distress and put you into a debt trap.
Managing Multiple Credit Cards
A few smart tips listed below can help you manage multiple credit cards in order to reap the maximum benefit.
Clear Outstanding balance Before Due Date
Instead of waiting up for the due date to arrive for clearing the outstanding balance on a credit card, make a habit of repaying the dues well before the due date. The best practice is to set a standing instruction with your bank for auto payment of credit card bill on a particular date. Instead of paying credit card dues from different banks or bank accounts, try to make payment from a single bank account so that you can track it easily.
Understand The Purpose While Selecting A Credit Card
You should first assess the need behind having a credit card. You don’t want two cards that offer the same type of benefits. It is best to go for credit cards that would cover wider spending needs. While some cards may provide higher rewards on purchase of air tickets some may provide cash back on online shopping. Therefore, it is important that you select the right card as per your purchasing/spending habit. But do not indulge in unnecessary expenses through your credit cards in order to get rewards.
Set An Appropriate Due Date
All your credit cards may have different due dates set at the time of acquiring them, but the companies allow you to change the date based on available choices. As per your payment comfort, you may make changes in the due date so that you do not find difficulty in repayment and miss it.
Review Your Cards regularly
It is important to regularly review your credit cards to weigh the benefits against the cost. For example, you may need to pay annual fees for a card or the card company may have changed the terms and conditions to reduce the benefits available. In such a scenario, you might want to replace the card with a better choice to ensure that you get benefits as per your plan.
Having multiple credit cards could be a good idea provided you use it judiciously. If you are planning to get more than one credit card, make a choice as per your needs. Do check a card’s value for money proposition and thereafter decide whether you should have it or not!
(The writer is CEO, BankBazaar.com)