Having more than one card can help you get the most out of savings and user experience. But you will get full benefit of this only when you are aware of some important things.
Certain Types of Credit Cards
Credit card is considered to be a beneficial spending medium as it allows you to buy now and pay later. Apart from regular credit cards, there are some other specially made credit cards in the market that facilitate easy spending as well as additional savings through instant discounts, cashbacks and reward points.
Special cards are made for certain types of expenses. Travel credit cards, for example, offer travel-related benefits such as air miles that can be used to avail flight ticket discounts and free seat upgrades, complimentary lounge access, free travel insurance cover, special discounts with partner hotel chains, And so on.
Likewise, some credit cards are suited for online spending that gives participants such benefits as instant discounts, special offers or more reward points in e-commerce websites.
Therefore, many credit card users spend in many ways, where only one credit card is not able to give much benefit. Having more than one card there can help you get the most out of Savings and User Experience. But you will get full benefit only when you know how to use them, you can get maximum rewards and for this, it is also necessary to make full payment of all your due on time.
How Many Credit Cards Should You Have?
The following points should be kept in mind while using more than one credit card.
Many cards, many benefits
Different credit cards offer different types of spending benefits. For example, with the help of cards suited for online benefits, you can save more money on online expenses.
But if you have another card that offers offline grocery purchases, utility bill payments, fuel refills, food expenses and cashback on clothing purchases or more reward points, your total monthly savings can increase significantly.
Now, if you have another card that gives rewards on travel related expenses, then you can save a lot of money by booking a flight or hotel with that card. Some credit cards offer certain types of facilities such as complimentary lounge access, loyalty discounts at major hotels, movie theaters, airlines, golf clubs, restaurants and supermarket chains, etc.
Higher credit limit
With just one credit card, your credit limit may be reduced when making a major purchase. Credit utilization ratio (CUR) can increase if you spend more than the card, which can have a bad effect on the credit score. Whereas, if you spend the same amount on more than one credit card, the CUR will be less. The CUR should be kept below 25-30% to keep the credit score just right.
For example, spending Rs 20,000 a month with a credit card with a credit limit of Rs 50,000 will result in a CUR of 40%, which may have a negative impact on the credit score. But if there is another card with a credit limit of Rs 50,000, the total credit limit will be Rs 1 lakh. The CUR will be just 20% of the cost of Rs 20,000 from both cards.
More flexibility in terms of reward points
On most credit cards, a billing cycle gets reward points up to a predefined limit. Many credit cards have a validity of reward points after which they cannot be redeemed. With more than one card, you can transact with other credit cards if you have difficulty converting all your expenses to reward points with the help of your primary card, or when the primary credit card’s reward points are exhausted, use another card’s reward.
In this way, using more than one card can provide a greater chance of redeeming your reward points for your favorite transactions and availing free accessories, instant discounts, etc.
Acts as a backup
If there is more than one card, the second card can be used in case the primary card is stolen or it is not accepted elsewhere. It is beneficial to have more than one card as a backup, especially during difficult times or while traveling.
There is a chance to take full advantage of the interest-free period.
The time between the due date of the credit card bill payment from the first day of the billing cycle is called the interest-free period. It can be 20 to 60 days depending on your card. On making full payment of the credit card bill on time, there is no interest. Having multiple cards with different billing cycles can help to plan your spending more efficiently.
Other important things to remember
Make full payment of all cards due on time
Even if there is more than one card, the total outstanding due of each card must be paid in full on time. Late or incomplete payments may result in interest and credit score may be adversely affected or debt may increase. So keep an eye on all due dates or give a standing instruction to auto-debit the bank for timely payment of all your card dues and keep all your expenses within your budget.
Keep track of all related charges
Only after knowing about the joining fees, annual renewal fees, interest charges, late payment penalty, etc. of all the cards, and if there is no extra pressure on your total monthly card spending budget -Get more cards and use them. Know how much it is necessary to spend on a new card to get maximum rewards, cashback and reward points limit, etc. so that they do not have to face tragic surprises later on.
Benefits of Additional Cards
Take additional cards only when you use your previous cards frequently. Even if it is more beneficial to use more than one card, you should take the cards only if it is useful. For example, if you rarely shop online, then taking a card that gives 10 times reward points on online shopping will not be very useful for you. Also, it should be avoided to take more than one card giving the same type of benefits.
Avoid constantly applying for more than one card
When applying for a new credit card, there is a ‘hard inquiry’ on your credit profile that can cause the credit score to drop over time. Therefore, after comparing your card options, shortlisting a few cards based on your qualifications and needs, apply for a card that you like the most. Continually applying for more than one card can have a bad effect on your credit score, so increase your credit card collection gradually.