Looking at the lucrative offers that come with the credit card, many of us are tempted to own more than one! Having multiple credit cards offers many benefits but has drawbacks, too. Financially disciplined people who can maintain all their credit cards responsibly can enjoy the advantages. However, those who are not can get trapped in multiple debts and jeopardize their credit health.
Here, we explain the pros and cons of using multiple credit cards. Go through the same and check whether you can efficiently manage several credit cards, or it can be challenging.
Using Multiple Credit Cards
Holding a range of credit cards with different features can unlock several advantages. For example, if you have a travel credit card, you can use it for funding your travel like buying air tickets, paying for excess baggage, etc. This credit card is not for routine expenditures like grocery stores. Hence, one of the causes of using multiple credit cards is to avail them for different purposes and earn more rewards.
Multiple Credit Cards: The Benefits
Here we list the numerous benefits of having many credit cards:
1. Lowers Credit Utilisation
Suppose you are using a single credit card to make all the payments. If your credit limit is Rs. 50,000/- and you use Rs. 40,000/-, your credit utilization will be 80%. However, if you are using other cards too, you will have a bigger credit limit. This will make your utilization ratio smaller. Let us take the same example. Consider having another credit card with the same limit of Rs. 50,000. You are using Rs. 10,000/- from it. Now your credit limit for both the cards will be Rs. 1,00,000. Your total utilization is Rs. 50,000/-. Your credit utilization will come down to 50%.
If you are thinking how much credit card limit should I use, then the ideal utilization is of 30%.
2. Improved Credit Score
If you have several credit cards, you can augment your credit score by paying your outstanding on time. A good credit score helps you avail lucrative financial facilities. You can increase your creditworthiness and allow yourself several credit lines.
3. Increases Credit Limit
As mentioned earlier, holding many credit cards means having a higher credit limit. Ensure to use the available credit responsibly and not overspend.
4. Good for Emergencies
If one of your credit cards is unavailable or missing, you can use another for making expenses. This provides you safety net during an emergency need for funds.
5. Rewards and Cashbacks
Multiple credit cards bring you a host of rewards and cashbacks. You can redeem the points and enjoy all the perks and benefits.
Multiple Credit Cards: The Drawbacks
Having many cards can also pose some difficulties. Here, we list them all.
1. Difficult to Manage
It is a hassle to manage all the credit cards. You will have to keep track of every card, the due date, making payments for different cards, and more. With so many things, there are high chances to miss some payments. This can bring your credit scores down.
2. Collect Debt
Multiple credit cards will come with enhanced credit limits. This means you might be tempted to spend more. If you overspend, you will be under debt. So, the cardholders are requested to spend cautiously.
3. Risk of Decreased Credit Score
If you do not pay the dues for even one of the credit cards timely while paying the rest, your credit score will drop.
4. Exposure to Theft or Fraud
Having many cards makes you more exposed to theft or fraud. The hackers may steal your identity, pretend to be you, and shop for expensive items.
Wrapping Up
If you are wondering whether it is better to have multiple credit cards, then be informed that it has both advantages and disadvantages. Those holding many credit cards should ensure to manage their payments well. For disciplined cardholders, owning several cards is a boon. It offers them rewards and allows them to build better credit scores. But if your credit card defaults, it will severely impact your credit score.
FAQs
1. What are the benefits of having multiple credit cards?
Ans. Every credit card offers a special feature. With many credit cards, you can enjoy various benefits. Also, you get a higher credit limit, which makes your low credit utilization ratio low and score higher.
2. Should I use multiple credit cards?
Ans. There is no harm in using various credit cards. However, it would help to remain cautious, as handling many credit cards simultaneously can get tedious.
3. Does the lender approve multiple credit card applications?
Ans. The credit card issuer will approve the applicant’s application for multiple credit cards if they have a good credit repayment history.
4. How many credit cards should one hold?
Ans. There is no such specific number. You can have two or three credit cards, as they are manageable. Having more than three credit cards is not suggested. However, if you make timely payments for all credit cards, you can have more.
5. If I hold many credit cards, will I have a low credit score?
Ans. If you are maintaining all the credit cards responsibly and paying your dues on time, it will not impact your credit. However, with good credit behavior, you can have a better credit score.
6. What are the disadvantages of having more than a single credit card?
Ans. The disadvantages of holding many cards include difficulty in managing, increased debt exposure, risk of fraud and low credit score, etc.
7. How can having multiple credit cards affect my credit score?
Ans. If you have several credit cards and manage your payments disciplined, you will get a higher credit score.