Santa Claus comes around just once a year. In the meantime, there are Credit Cards.
  • Pros & Cons Of Having Multiple Credit Cards

    Having multiple credit cards has its own set of advantages and disadvantages. While managing several credit cards can be quite a challenge for an individual, if used smartly, having more than one card can also be a boon. People are often tempted to apply for many credit cards because different credit cards come with different features and exclusive benefits. For example a travel credit card is suitable only for travel related expenditure and will give maximum rewards only if used for travel purposes. This is why many people tend to have different credit cards for different type of spending.

    Is It Okay to Apply for Multiple Credit Cards at Once?

    There is no harm in applying for several credit cards at the same time because each application is reviewed and considered separately. On the other hand, it is also wise to be a little cautions because managing a number of credit cards can get challenging.

    • Many banks approve multiple credit cards if the applicant has a good track record.
    • Each type of credit card comes with its own set of unique benefits and hence some individuals need more than one card.
    • Those with a very good credit score can apply for additional credit cards.

    Can You Have too Many Credit Cards?

    This depends entirely on the type of credit card that the applicant holds. For example, if an individual holds a diverse range of credit cards that are very different from each other in terms of usage and benefits, then it is okay. Let's say, one is a travel credit used for travel-related expenditure and the other is a rewards card used for regular purchases. The travel credit card is not ideal for regular purchases made in supermarkets, etc, while a regular credit card is not ideal for travel expenditure. Hence, it makes sense because you cannot get maximum rewards points and travel related perks on a regular credit card.

    • Ideally, having 2 or 3 credit cards, each with exclusive features: 1 for travel, 1 for regular use and 1 for online shopping is not bad
    • However, having more than 3 credit cards is generally not recommended.
    • Those who are able to manage with one credit card should stick to one.
    • As long as the individual is making payments regularly on all credit card bills, it will not affect or have an impact on access to other forms of credit.
    • For those who own their own business, it makes sense to have 1 credit card for personal use and another only for business.

    Advantages of Having Multiple Credit Cards

    • Helps keep credit utilization ratio low: If you have one single card and use 90% of the credit limit, it will naturally bring down the credit utilization score. However, if you have more than one card and use just 50% of the credit limit, it will help maintain a good utilization ratio that is ideal.
    • Helps build credit score: Those who have several credit cards and still make all payments on time, will build a very good credit score. This will increase the credit worthiness of the individual and give him or her access to more credit opportunities.
    • Increases credit limit: Having many credit cards gives the cardholder access to a higher credit limit. However, this should be used responsibly.
    • More rewards and cashbacks: Multiple credit cards give customers access to more card-related perks and benefits, which may be in the form of cashbacks and rewards.

    Disadvantages of Having Multiple Credit Cards

    • Difficult to manage: Having more than one card means keeping track of each billing cycle, credit limit and payment due date. This can get overwhelming and missing even a single payment due date can have an affect on credit scores.
    • Can lead to unnecessary debt: Having access to more credit can often be tempting. This can lead to overspending and this will inturn add to debt. If cardholders are not cautions enough it can easily lead to overspending.

    Credit Score and Multiple Credit Cards

    • Those who have several credit cards and manage their payments in a systematic and disciplined manner, tend to have higher credit scores than those who have a single card and max out their credit limit.
    • Several credit cards give a customer the privilege of a higher credit limit and hence in such cases the credit utilization ratio of the individual fits into the ideal level.
    • If credit card holders default payments on multiple cards, it can have a significant negative impact on the credit score.

    The Bottom Line

    According to research, most people have around 3 to 4 credit cards. While there is no ideal number, what is important is not how many credit cards a person holds but how well all credit card accounts are being managed. If well managed, this can open doors to more perks, benefits, cashbacks and rewards.

    How to Reap The Benefits of Having Multiple Credit Cards

    Many credit cardholders wonder if it is beneficial to hold multiple credit cards. Having multiple credit cards have both pros and cons. Though having more than one credit card and not paying your dues on time can affect your credit score negatively. But, if used wisely, having multiple credit cards can be beneficials. There is no ideal number of credit cards you can own. You can own as many credit cards as you want as long as you are eligible for it. However, having multiple line of credit can make you look like a desperate borrower and increases the overall available credit. If you do not maintain the right credit utilisation rate, your credit score may be reduced.

    Also, in future, when you apply for a loan, the number of credit cards you own may affect your overall repayment capacity. However, you can reap the benefits of holding multiple credit cards in the following ways:

    • You can choose one of your credit cards that offers great rewards on utility bill payments. This way, every month when you are paying your utility bills, you can save.
    • If you are unable to pay one of your credit card bills, you can transfer funds from your other credit card and avoid paying interest or late fee. This is only beneficial if the due dates on your credit cards are not the same and you get ample time to arrange funds and pay your credit card bill.
    • With multiple cards that provide you rewards, deals, and discounts in segments of your choice, you can increase your overall gains by transacting through each of them.
    • Multiple credit cards used together provide you with an enhanced spending limit.
    • Used with responsibility, multiple credit cards can provide you tremendous spending power, enhanced lifestyle, and the chance to improve your credit history.

    FAQs on Pros & Cons of Having Multiple Credit Cards

    1. Do I have to be eligible for holding more than 1 credit card?

      Yes, having more than 1 credit card can often add up to credit card debt if not maintained properly. Banks conduct a thorough check of your credit score, credit report, etc. before giving you another credit card.

    2. What are the advantages of holding more than 1 credit card?

      The advantages of holding more than 1 credit are many such as it helps in building up your credit score, adds to your credit limit which can be used during emergencies and other additional benefits in the form of reward points.

    3. How many credit cards can I hold at one time?

      It is advised not to hold more than 2 credit cards at once. However, if you are holding more than 2 credit cards and are able to repay the amount on a monthly basis, you may hold up to 3 credit cards.

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