When there are different clothes for different parameters of your life, like you have your work clothes, party clothes, wedding clothes and the best one, home clothes; imagine if you have the same system with your credit cards. How exciting would that be. You have different cards for shopping, groceries, fuel, dining, entertainment and travel. It is just like your wallet is a complete wardrobe for your cards.
Pros of using multiple credit cards
● Convenience or backup: Credit cards are fitting when buying something or making payments. If you run out on credit limit of one of your cards you can easily opt for another one. Just a swipe and the deed is done.
● Merchant Compatibility: Some store owners accept MasterCard and others Visa. Having multiple credit cards can solve this mix-up for you.
● Preference of banks: Many online e-commerce websites or offline retailers have tie ups with certain banks such as if the payment is done via credit card of their partner bank customer is benefited to get cash backs and discounts.
● Online Shopping: Keep a separate credit card for all your online purchases with a lesser spending limit. This helps you be clear of identity theft and other credit card related frauds. Use a different card for all your offline purchases.
● Fraud Protection: Having one card that you use for absolutely everything leaves you more vulnerable to fraud. The higher your purchase capacity with any one card, the more opportunities there are for the card to be hacked. Having multiple cards spreads the risk.
● Reward points: Having multiple cards increase your reward points on every card and you can avail varied offers associated with all the different cards. You might find yourself eligible for different loyalty programs, gifts, discount schemes and bonuses on different cards.
● Dedicated cards: Analyse your spending habits and then choose speciality cards that favour your lifestyle the most. If you have wanderlust pick a travel card that gives you air miles, if you are a big foodie choose the card that furnish beautiful dining offers or if a movie maniac find yourself an entertainment credit card. There are cards providing fuel surcharge waivers, grocery discounts etc. So settle on those cards that compliment your lifestyle perfectly.
● Credit score: Keep your card utilisation ratio up to 30% of its credit limit and spread your expenses all over your cards. Do not drain one card’s credit limit completely. Having multiple cards and making regular timely bill payments can increase your credit rating.
Cons of using multiple cards
● Confusion: The more cards you have the more back-breaking your financial life becomes. You’ll have to keep up with more bills, remember to pay them on time and remember to keep your credit utilisation ratio below 30% if you want a high credit score.
● Effort: Managing multiple credit cards is an effort because it requires a proper schedule, which you need to figure out and keep a tab on. You need to keep track of the payment dates, the interest free period and the credit limit for each card.
● Fees: Though, zero annual fee cards are gaining popularity but still some fee is always associated with your credit card transactions and when you possess multiple credit cards this charge multiplies.
● Purchasing power: If you are a shopaholic it is highly discouraged to use multiple credit cards, it increases your purchasing power will completely wreck your budget.
● Debt risk: If you anyhow forget to make payments for any card, your interest will shoot up and eventually can drown you in neck-high debt.
● Credit rating: Missing out on any bill can adversely affect your credit score. If punctual payments are not made, having multiple credit cards can turn out to be a curse for your credit rating and affect your ability to get loans in the future. Multiple credit cards requires you be to very responsible.
While deciding on keeping more than one credit card, there is no correct answer of yes or no, but you should scrutinise your spending habits and your organisational capabilities. Whether you are a high roller or a meek spender, a responsible or a careless person.That self introspection can give you a better reply.