If you already have a credit card, the fear of falling into an unmanageable debt trap prevents you from getting another one. However, for those who are financially disciplined, this fear does not prevent them from having multiple credit cards.
While having multiple credit cards may provide you with twice the benefits of one credit card, it may also lead to you falling further behind if not used diligently. Individuals are frequently tempted to apply for multiple credit cards because different credit cards offer unique features and benefits. A travel credit card, for example, is only appropriate for travel-related expenses and will provide the best rewards if used for travel. Here is a list of the benefits and drawbacks of having multiple credit cards to help you decide whether it is worthwhile.
Can You Have More Than One Credit Card?
This is entirely dependent on the type of credit card held by the applicant. It is acceptable, for example, if a person has a diverse range of credit cards that are very different in terms of usage and benefits.
Assume one is a travel credit that is used for travel-related expenses and the other is a rewards card that is used for regular purchases. A travel credit card is not suitable for regular purchases in supermarkets, for example, whereas a regular credit card is not suitable for travel expenditure. As a result, it makes sense because you cannot get the most rewards points and travel-related perks with a standard credit card.
Ideally, you should have two or three credit cards, each with unique features.
Having more than three credit cards, on the other hand, is generally not advised.
Those who can manage with just one credit card should keep it. It will not affect or have an impact on access to other forms of credit as long as the individual makes regular payments on all credit card bills.
It makes sense for those who own their own businesses to have one credit card for personal use and another for business use.
Advantages of Having Multiple Credit Cards
Different credit cards offer different advantages. Having multiple credit cards entails receiving numerous additional benefits. Let’s look at some of the other advantages of having multiple credit cards. –
- Maintain your credit utilisation ratio
If you only have one credit card, you will be unable to make the most of it due to limitations in reaching your credit limit to the maximum. As a result, having multiple credit cards helps to maintain the credit utilisation ratio (CUR) because you have a variety of credit cards to use. For example, if you only have one credit card and use 90% of its credit limit, your credit utilisation ratio will automatically decrease. However, if you have multiple credit cards and spend no more than 40% of the credit limit on each card, your credit utilisation ratio will be automatically maintained.
- Improves credit score
The only way to have a good credit score is to make good use of your credit card. Proper use and timely payment of your credit card bills can significantly improve, if not maintain, your credit score. Having multiple credit cards will directly multiply the benefits, and effective use of each will significantly improve your credit score.
- Extra benefits
Each credit card has its own set of benefits and rewards. The more credit cards you have, the more likely you are to receive benefits. Travel credit cards provide benefits to travellers, whereas fuel credit cards provide benefits to daily commuters. If you have needs that will be met by both of these cards, you may purchase both of them. This will provide you with travel and fuel benefits in the form of rewards, cashbacks, and discount vouchers, among other things.
- Take advantage of the interest-free period
The time period from the date of purchase to the due date of repayment of the spent amount is referred to as the interest-free period. It should be noted that if you pay your credit card bills before the due date, you will not be charged interest on the credited amount. This interest-free period lasts from 18 to 55 days after the transaction is completed. If you have multiple credit cards, you can take advantage of the interest-free period on each one.
The Drawbacks of Having Multiple Credit Cards
While having multiple credit cards has many benefits, it also has some drawbacks. Let’s look at the disadvantages of having multiple credit cards-
- Difficult to manage
Having multiple credit cards means having to read multiple terms and conditions, remember multiple billing cycles, and pay multiple bills. While having multiple credit cards may appear to be advantageous at the time of use, they can be difficult to manage. As a result, it is critical to keep track of each of your credit cards separately in order to avoid financial complications.
- Increased debt risk
Having more credit cards means having a higher spending limit. While this may be useful in an emergency, it may have a negative impact when it comes time to repay those credits. As a result, it is critical to spend no more than the minimum amount on each credit card. When you have multiple credit cards, you should not use them to spend more than you can repay.
- Risk of a credit score decline
When you apply for multiple credit cards in a short period of time, your credit score is more likely to suffer. However, this may only be detrimental to you in the short term. Having multiple credit cards will provide you with significant benefits in the long run.