Multiple Credit Cards: Boon or Bane?

Having a credit card can be quite enticing due to the plethora of benefits that it offers. However, is it wise to have multiple credit cards? Credit cards directly affect your credit score and credit report. Whether owning multiple credit cards is beneficial or not, solely depends on how sensibly you make use of your credit cards.

There are advantages as well as drawbacks of having multiple credit cards. A thorough understanding of the pros and cons should help you make an informed decision.

Listed below are the advantages of owning multiple credit cards:

Boosts Your Credit Score

If you own many credit cards and still manage to clear all your dues on time, you will be able to build a fine credit score. Such a credit score will help increase your creditworthiness and provide more opportunities to access additional credit.

Provides Interest-free Period

The term between your purchase date and payment due date is referred to as the interest-free period. If you pay out your bills before the set due date, you will be able to evade any interest charges on the credit amount used. This period generally lasts about 18 to 55 days post transaction, during which no interest will be applied. This can keep you from incurring any unnecessary costs.

Earns Increased Rewards

Each credit card is equipped with different rewards and benefits. While some credit cards offer rewards on shopping, some others offer travel rewards. Therefore, multiple credit cards can help you get increased rewards, cashbacks and bonuses.

Makes the Payment of Bills Flexible

Multiple credit cards can help you allocate your payments across various credit cards, rather than letting the debt pile up on one single card. By doing so, you can benefit from the different interest rates and simplify your credit card debt payment as much as possible. Additionally, keeping separate cards to manage your professional and personal expenses will help you make a clear distinction between the two and help you sort your finances proficiently.

Functions as Backup During Emergencies

Having multiple cards can serve as backup in desperate situations. If your credit card fails to process payments due to unanticipated technical issues, you will always have another card to fall back on. This will help you avoid any embarrassments. This can also prove to be beneficial if you lose your card or it is stolen.

Provides Financial Flexibility

With multiple credit cards you will be able to manage everyday expenses as well as cover any unexpected expenses. Owning multiple credit cards will help you split a large expense between two or more credit cards so that your utilisation rate remains low, and you do not exceed your credit limit. This will help you maintain a high credit score.

Helps Maintain a Low Credit Utilisation Ratio

If you own only one credit card, you might end up spending more than 90% of your credit limit. However, if you have multiple credit cards, you will be able to evenly distribute your payments between cards and manage to maintain a credit utilisation ratio of 30% or below. This will in turn help you keep up a good credit score.

Just as there are advantages to owning multiple credit cards, there are drawbacks as well.

Let’s take a quick look at the cons of having multiple credit cards:

Makes Managing the Cards Difficult

Owning multiple credit cards can be quite overwhelming since you will need to diligently keep an eye on the credit limit, payment due date, and billing cycle of each card. Missing out on even one aspect can drastically affect your credit score. If you have a busy lifestyle, it might be inconvenient to constantly keep a track of all your credit card transactions.

Could Lead to Debt

With multiple credit cards comes a greater purchasing power which might lead you astray. You might end up spending over your limit, assuming you have other credit cards to help you manage your dues. This kind of reckless spending can lead to debt, which will only accumulate over time and prove to be a colossal disaster.

Might Result in a Bad Credit Score

One of the important parameters that a credit card provider takes into consideration while approving your credit card application is the credit score. It is necessary that you maintain a credit score above 750. If you clear your dues and make payments on time, you will be able to maintain a fair credit score. However, multiple credit cards will tempt you to indulge in excessive expenditure, which will gradually pile up an exorbitant debt and wreck your credit score.

Credit cards are exceptional financial instruments, and owning multiple credit cards can be extremely beneficial to handle your finances, if you manage them efficiently. It is vital that you educate yourself on the features and benefits of each credit card and decide which card will be the most advantageous for you. Furthermore, there isn’t an ideal number of credit cards that one should own. As long as you manage to pay your dues on time, maintain a fair credit score and keep your credit utilisation ratio low, there shouldn’t be an issue in owning multiple credit cards. However, it is crucial that you be mindful with your expenses and use your credit cards responsibly.