In India, credit cards are becoming a necessary financial instrument for a large number of people. They provide benefits, ease, and the chance to establish a solid credit history. But figuring out how many credit cards is really a good idea might be difficult with so many possibilities available. The answer to this question is dependent on a number of variables, such as your income level, spending patterns, credit score, and ability to manage debt.
A solid credit history, rewards and cashback, and varied credit utilization are just a few benefits of having multiple credit cards. It does have certain drawbacks, though, such as making several payments more difficult, being more likely to overspend, and having a detrimental effect on credit score.
Finding a balance that serves your needs and your financial objectives is essential. In this blog, we will discuss the things to think about when choosing how many credit cards to have, the benefits and drawbacks of having several credit cards, and suggestions for how many credit cards to have depending on your financial circumstances.
Is It Beneficial To Have Many Credit Cards?
Having many credit cards can be advantageous as long as you handle each one wisely.
Your credit score is influenced by the number and type of credit accounts you have. If you want to establish or maintain a strong credit score, it is normally advised to have two to three credit card accounts and other forms of credit. This combination might boost your credit score.
When viewing your credit report, lenders and creditors want to see a diverse range of credit types. Maintaining several credit accounts gives lenders the impression that you know how credit operates and can control the amount you borrow.
Additionally, many credit cards give users access to exclusive reward schemes. These could be vacation perks, cashback opportunities on specific purchases, or other incentives.
Things To Consider Before Having Multiple Credit Cards
Various credit card options can help with rewards and cashback, diversifying your use of credit, and establishing a solid credit history, among other things. Before submitting applications for various credit cards, it’s crucial to consider a few things. Before obtaining numerous credit cards, take into account the following factors:
Credit Score
One of the most crucial things to consider when applying for several credit cards is your credit score. A high credit score indicates careful borrowing and timely debt repayment in the past. Applying for numerous credit cards might lower your credit score if you already have a poor score, making it harder to get approved for loans or other credit in the future. As a result, before applying for several credit cards, you must focus on raising your credit score.
Income Level
Before applying for several credit cards, you should carefully evaluate your income level. If your income is high, you can handle several credit cards without problems. Managing several credit cards, however, can be difficult if you have a low income and run the risk of accruing debt you cannot pay back. Therefore, before applying, it’s crucial to assess your income level and make sure you can afford to pay the balances on several credit cards.
Spending Patterns
It’s also important to consider your spending patterns before applying for several credit cards. It might not be a good idea to have several credit cards if you tend to overspend or accumulate debt. However, if you manage your money well and make your bill payments on time, having several credit cards can have advantages, like cashback and perks.
Debt Management
It’s essential to assess your ability to manage your bills before applying for multiple credit cards. Having more than one credit card may worsen matters if you have a past of accruing debt or find it difficult to make ends meet. Therefore, before applying for several credit cards, you must strengthen your debt management abilities.
Costs and Interest Rates
It’s crucial to consider each credit card’s costs and interest rates while applying for several of them. Certain credit cards can be more costly than others due to their high-interest rates or yearly fees. It is crucial to compare each credit card’s costs and interest rates and select the ones that provide the most value for your money.
Know More: Credit Card Interest Rates May 2024
Rewards and perks
Lastly, assessing each credit card’s rewards and perks is critical when comparing them to other options. Credit cards sometimes offer cashback, travel rewards, and other benefits that can help you save money or accrue incentives. Consequently, selecting credit cards that provide the greatest perks and rewards for your spending patterns and financial objectives is critical.
How Many Credit Cards Should You Have?
Since every person’s circumstances are unique, there is no set number of cards that are ideal for you to possess. However, to profit from the inherent ease, security, and other advantages, there’s a compelling case to be made for owning at least one credit card. Whether you need additional credit lines to meet your monthly spending needs or want to use your regular purchases to earn benefits like cash back, points, or airline miles, it might help you justify owning multiple credit cards.
Many people struggle to manage more than two or three credit cards. However, because your credit requirements and financial position are unique, there is no hard and fast rule about how many credit cards are too many. The most important thing is to utilize your credit cards properly.
Read More: Best Credit Cards in India
Pros and Cons of Having Multiple Credit Cards
Having many credit cards might provide several benefits, but it also has some cons. Here are some important pros and cons to consider:
Pros
- Maintains a Low Credit Utilization Ratio: Using 90% of your credit limit on a single card will automatically lower your credit utilization score if you have only one card. Nonetheless, you can maintain an optimal utilization ratio by using just 50% of your credit limit when using multiple cards.
- Aids in Credit Score Development: Those who maintain many credit cards and consistently make all their payments on schedule will have excellent credit scores. As a result, the person will have more creditworthiness and be eligible for more credit opportunities.
- Boosts Credit Limit: A cardholder with multiple credit cards can obtain a bigger credit limit. However, this should be exercised with caution.
- Increased Cashbacks and Rewards: Having multiple credit cards allows users to take advantage of additional card-related incentives, such as rewards and cashbacks.
Cons
- Difficult to Manage: Managing multiple cards requires keeping track of each billing cycle, credit limit, and payment due date, which can be challenging. This may become very stressful, and failing to make even one payment on time can lower credit scores.
- Can Lead to Unnecessary Debt: It’s often appealing to have additional credit available. However, this may result in overspending, which would increase debt. Careless cardholders run the risk of overspending.
Tips on Managing Multiple Cards
Here are some ideas for efficiently managing multiple credit cards:
- Set up automated payments: To prevent missing due dates and suffering late penalties, set up automatic payments for the minimum amount owed on each card. This can help you remain on top of your payments and maintain a positive payment history, which is important for your credit score.
- Keep track of your spending on all cards: Consider using budgeting software or a spreadsheet to track your balances, due dates, and expenditure categories. This can help you avoid overpaying and ensure you use the correct card for the relevant purchases to maximize your benefits.
- Prioritize high-interest debt: If you have balances, pay off the card with the highest interest rate first. This can help you save money on interest fees in the long term.
- Use balance transfer offers strategically: If you’re struggling with high-interest debt, try taking advantage of balance transfer offers from other cards with low introductory APRs. This can provide temporary relief and allow you to pay your obligations without accumulating too much interest.
- Review and change your credit limits. Regularly evaluate your credit limits and alter them as appropriate. If your income or expenses have changed, you may seek a higher limit on your main card or decrease limits on cards you don’t use as frequently.
Bottom Line
The right amount of credit cards to hold is a personal choice that needs to consider your spending patterns, financial objectives, and capacity for responsible account management. Even though having several credit cards might have benefits like higher credit limits, access to a variety of rewards programs, and improved fraud protection, it’s important to maintain moderation and stay away from potential traps like overspending or late payments.
Managing many credit cards effectively ultimately depends on your ability to be organized and practice financial discipline. You may take advantage of having numerous credit cards while keeping your credit profile in good standing by keeping a close eye on your spending, making timely payments on your balances, assessing your credit utilization, and mixing regularly.
It’s crucial to remember that having a lot of credit cards isn’t the only thing that affects your credit score. Regardless of the number of cards you own, responsible credit management—which includes making on-time payments and using your credit responsibly—is essential to keeping your credit score high.
Frequently Asked Questions (FAQs)
How many credit cards should I have?
Your financial condition and aspirations will determine how many credit cards you should have. In general, it is suggested that you have at least one credit card for emergencies and to establish a good credit history. However, using more than two or three credit cards may not provide significant benefits and can make it more challenging to manage your payments.
Is it bad to have several credit cards?
Having many credit cards is not necessarily bad, as long as you manage your spending and payments responsibly. However, if you have a history of overspending or debt accumulation, using many credit cards may not be the best option. Before applying for several credit cards, consider your financial condition and spending patterns carefully.
Can having many credit cards lower my credit score?
Many credit cards can lower your credit score if you are not responsible for your spending and payments. Each credit card application triggers a hard inquiry on your credit report, which can temporarily reduce your credit score. Additionally, accumulating debt or missing payments on many credit cards can negatively influence your credit score.
How can I manage many credit cards?
Managing many credit cards can be difficult, but there are several approaches you can take to make the process easier. For example, you can set up automated payments for each card, make a budget to keep track of your spending and verify your credit card statements on a regular basis to ensure there are no errors or fraudulent charges. You can also use a credit card management app or application to keep track of your cards and payments.
