What are the benefits and drawbacks of having multiple credit cards?

By Qrius

Like with everything else, having multiple credit cards has benefits as well as drawbacks. There’s no ‘right’ number of credit cards to have, it’s a personal decision. But you should know what the implications are.

Here are the benefits of having multiple credit cards:

Increased benefits

One of the most obvious benefits of having multiple credit cards is that you can optimise on various reward schemes and incentives. Whether it’s discounts at the grocery store or free flight tickets, credit card rewards are beneficial when you use them for your daily expenditures. If you play your cards right, you can get the most out of having multiple credit cards.

For example, with the Bajaj Finserv RBL Bank SuperCard, you can earn reward points on every transaction and enjoy discounts on movie tickets and more every month. When you apply for credit card, you can win up to 20,000 reward points as a welcome gift.

Lower credit utilisation ratio

How much credit you utilise in comparison to your total credit limit is expressed as a percentage and is called the credit utilisation ratio. This ratio has a direct impact on your credit score.

It’s advisable to have a credit utilisation of 30%. One of the advantages of having multiple credit cards is that if your expenses cross this ideal 30% on one credit card, you can simply use your other credit card. Such a split of expenses between multiple credit cards will help you maintain a good credit score.

Plan B

Whatever it may be, having a ‘plan B’ is wise. How embarrassing would a situation be where you’re at the payment counter and for some reason your credit card is declined? This may happen sometimes due to certain errors. Having another credit card as back-up is essential. It can also help when you need additional funds to tide over certain unexpected expenses.

The following are the drawbacks of having multiple credit cards:

Risk of overspending

Having multiple credit cards could encourage overspending. If you’re someone who tends to indulge in many impulse purchases, having multiple credit cards may just seem like an opportunity to spend more.

Poor credit score

In the long-term, having a few credit cards that you use consistently is good for your credit score. However, there’s a risk of getting a poor credit score if you apply for multiple credit cards in a short span of time because it makes financial institutions think you’re desperate to take on more debt.

Stress

Having multiple credit cards means having multiple bills to pay and keep track of. In your already busy and stressful life this could just be another stress-inducing factor.

Depending on your spending habits and personality, having multiple credit cards could be a boon or a bane. If you’re a personal finance wizard, then opting for more than one credit card to maximise the benefits is the obvious choice. However, if you’re someone who is just easing into credit, you may want to stick with one credit card for now.