Most of us can do with one house and one car, but when it comes to credit cards, we are often confused about how many we should have.
There is no magic number of credit cards a person can or should have. However, it is essential to have the right card and utilise it right. For instance, if you do not travel much, a travel card may not be of much use to you. Similarly, keep your utilization rate low. “Typically, do not use more than 30-40 per cent of your credit limit at a time. Decide the number of cards you wish to hold basis these factors. Keep in mind that it is a good idea to retain your oldest cards as they have a much longer credit history,” says Pankaj Bansal, CBO (chief business officer), BankBazaar.com, a financial services website.
Multiple cards will also allow you to earn rewards and benefits on various expenses. However, you need to be able to manage them well. Several cards have annual fees, and minimum spend limits before you can access the bigger rewards. You need to assess if taking an additional card will simplify your life or complicate it further with different repayment dates and the pressure to spend more than what you are used to so that you can access the rewards. “Remember, you need to be able to repay what you spend using it. If you go overboard, you will end up being unable to repay what you owe. So, see if an additional credit card fits your spending pattern and can be taken up without additional burden. If you think not, go for the most comprehensive card that has benefits across different categories of expenses,” he adds.
Agrees Amit Suri, director and CEO of AUM Wealth, a financial services company, says, “One should always follow two rules when using credit cards. Rule No. 1: Pay all your outstanding well within the due date & never ever default or make part or minimum payments. This is the costliest debt ever. Rule No. 2: Never forget Rule No.1.”
Suri feels that owning more than two-three cards is meaningless. One could make differentiations in terms of Visa, Diner, and American Express to enable you to utilise them based on acceptability. Also, card companies may keep asking you to increase your limit based on your payment history; however, one should desist from unnecessarily increasing the limits. Higher limits increase the risk of misuse, unfortunate fraud, etc.
To sum up, you can have multiple credit cards as long as you are comfortable using them and are not overspending and paying your dues on time. However, do not apply for them at once. Space out your applications. “Do your research and apply only for one card from one issuer at a time. Make your repayments promptly and in full. Build your score and history and apply for a card,” adds Bansal.