In recent times, credit card growth has seen a boom among all classes of people. The various offers and rewards available – cash backs, travel benefits and the ability to make higher end purchases on credit cards attract more customers to get at least two to three credit cards.
But a lot of people still ask how many credit cards is too many? Is there a risk to get more than one credit card? Does it help with the credit score? Or will there be any hindrance in acquiring a loan from the bank if we own too many credit cards?
Well, there is no said ‘rule’ which says that you can have a particular number of credit cards. It all depends on your utilisation, spending personality and credit requirements. And the most important part, how well you can manage these cards.Owning more than a single credit card will surely help you in lower your credit utilisation ratio. Low credit utilisation helps in acquiring a loan easily as it sits well with the banks. Your ability to maintain and manage multiple cards brilliantly will be considered as a positive trait with the banks.
While a single credit card is difficult and may block the amount of funds that are available to you for utilisation, this is where a second card comes handy. After getting acquainted with how a credit card works, you can look for other credit card options and find one that is more suitable to your spending habits. You can have a second card, with the entire credit limit free which can be used in the time of emergency. You can also divide your credit utilisation on 2-3 cards that give you some mobility to spend and keep track of the same.
Most Indians these days are using two cards at the most: one as a basic card with standard benefits and one spend-based card that gives you extra benefits on your favourite categories.
On a monthly basis, we end up buying or spending a lot of things and using a credit card makes it easier as we do not have to pay the amount immediately but in smaller instalments over a period of time. However, this does not mean we end up using our credit card for every small thing.
Acquiring and using a credit card is the easiest part. However, managing them can be quite a task. It does not matter if you have one or five cards, if you do not manage them efficiently, then you might find yourself in a financial soup. The key is to strategise our credits in relation to our monthly cash-flow to not end up in a pile of debt.
If you are a spendthrift, it is better to get only the required number of cards that you actually need. When you use a credit card, you are under the obligation to pay the amount back as and when it is due. Paying the dues on time is quite important to maintain your credit score. Multiple credit card payment misses, not only wreaks havoc on your credit score, but you may also end up paying a hefty sum in penalties.
So before getting multiple credit cards, ask yourself: will you be able to manage all the credit cards simultaneously and be able to pay the dues each month? Will you be able to utilise all the reward points and air miles in your card before they expire? Or are the annual fees eating the benefits and rewards on your cards?
You should not get a card as your eligible to get one but analyse your expenses and get yourself the appropriate card.
Here’s what you should do. Want to get a credit card? Find out which one will suit you best
Relying on one card is not a smart step. Two to three cards can help you learn how to manage your finances smartly and increases your chance to manage bigger loans in the future.
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