If you are an existing cardholder, it is implied that the fear of stepping into an unmanageable debt trap would not let you buy another credit card. However, this fear does not act as a barrier to having multiple credit cards for the ones who are financially disciplined.
While having multiple credit cards may offer you twice as much the benefits offered by one credit card, it may also take you further down, if not used diligently. To figure out whether or not it is beneficial, here is a list of pros and cons of having multiple credit cards.
Pros of Having Multiple Credit Cards
Different credit cards come with different benefits. Having multiple credit cards means having multiple additional benefits. Let’s take a look at other benefits of having multiple credit cards-
- Maintain the Credit Utilization Ratio– If you have only one credit card, then you will not be able to make the most of it because of the limitations in reaching your credit limit to the maximum. Hence, having multiple credit cards helps in maintaining the credit utilization ratio (CUR) as you would have a number of credit cards to use. For instance, if you have only one credit card and you use 90% of its credit limit, then your credit utilization ratio would automatically go down. On the other hand, if you have multiple credit cards and you spend only 40% of the credit limit on each card, then your credit utilization ratio will automatically be maintained.
- Improves credit score– The only key to having a good credit score is to use your credit card effectively. Proper usage and timely payments of your credit card bills can help improve your credit score to a great extent, let alone maintaining it. Having multiple credit cards will directly multiply the benefits and effective use of each will improve your credit score to a great number.
- Extra additional benefits– Each credit card offers its own benefits and rewards. The more credit cards you have, the more benefits you are likely to receive. For travel credit cards offer benefits for travellers, while a fuel credit card offers benefits to daily commuters. If you have needs that will be fulfilled by both these cards, then you may go ahead buy both of them. This will offer you both, travel and fuel benefits in the form of rewards, cashbacks and discount vouchers, etc.
- Benefit from the interest-free period– Interest-free period is basically the time period from the date of purchase to the due date of repayment of the spent amount. It must be noted that if you pay your credit card bills before the due date, then no interest will be charged on the credited amount. This interest-free period lasts from 18 to 55 days of making the transaction. If you have multiple credit cards, then you can avail the maximum benefits of the interest-free period of each credit card.
Cons of Having Multiple Credit Cards
While there are major advantages of having multiple credit cards, there are a few disadvantages too. Let’s take a look at the cons of having multiple credit cards-
- Difficult to manage– Multiple credit cards imply multiple terms and conditions to read through, multiple billing cycles to remember, and multiple bills to be paid. While multiple credit cards may seem beneficial at the time of use, they may get troublesome to manage. Hence, it is important to keep a track of each of your credit cards separately such that you stay away from the complications of your financial life.
- Increased debt risk– More credit cards imply an increased spending limit. While this may be helpful in cases of emergencies, it may also turn out negatively at the time of repayment of those credits. Hence, it is important to spend only the actual required amount on each credit card and not more. When you have multiple credit cards, you should not consider them as an opportunity to spend more than you can repay.
- Risk of falling credit score– When you apply for multiple credit cards at the gap of shorter time periods, then your credit score is more likely to fall. However, this may work negatively for you only in the short-term. Having multiple credit cards will offer you great advantages in the long run.
There are both pros and cons of having multiple credit cards. It is entirely in your hands to decide what to make of your credit card. Only you are responsible for managing your finances well. If you are confident enough to manage multiple credit cards, and to repay all your credit card debts within the grace period, then you must be sure of availing the maximum benefits. On the other hand, if you believe that managing finances could be a challenging task for you, then it is good to stick to only one credit card.