HOW TO MANAGE MULTIPLE CREDIT CARDS: ALL YOU NEED TO KNOW
ABOUT CREDIT CARDS IN INDIA
The credit card has become popular due to the convenience offered by it. It’s a type of unsecured borrowing that lets you borrow according to your pre-decided credit limit under a bank or non-banking finance company (NBFC). You can make transactions with your credit card for various transactions as per your credit limit and then pay it back in due time. When you make a purchase, the amount is deducted from your predefined credit limit and when you repay, the amount is again added back to your credit limit. This enables you to have continuous access to credit as long as you are using less than your credit limit. However, if you do not repay the due amounts on time the bank will charge interest on the outstanding amount and this will keep adding up until you have cleared your bills. You can make transactions as per your credit limit, beyond that the transaction will be rejected by the credit card issuer. Various types are credit cards are available to meet the needs of customers ranging from student credit cards to lifestyle credit cards.
BENEFITS OF HAVING MULTIPLE CREDIT CARDS
1. ACCESS TO A HIGHER CREDIT LIMIT
When you have multiple credit cards it enables you to have a higher credit limit. For example, if you have a credit card with a Rs.50,000 credit limit you can only make transactions up to Rs.50,000, however, it’s not advisable to use all the credit limit. Hence you can only use a certain amount from your credit limit. But if you have multiple credit cards, your overall credit limits increase which enables you to make bigger transactions without going overboard with the credit utilization ratio.
2. PERKS AND BENEFITS
Banks offer a lot of rewards to their customers like providing cashback, discounts on certain purchases, rewards, etc. Having multiple credit cards allows you to enjoy a wide variety of benefits that come with them. This provides payment flexibility and makes it more rewarding.
3. HELPS TO BUILD YOUR CREDIT SCORE
A credit score is a three-digit number that indicates your creditworthiness. The higher the credit score the better the chances of getting approved for loans. One of the important factors that is taken into consideration while calculating your credit score is your usage of credit cards and regular payments. When you have multiple credit cards and pay the due amounts on time it improves your credit score. Having a single credit card limits your credit card usage. But with multiple cards, you can make purchases with different cards and make the payment of different amounts on different due dates.
4. HELPS TO MAINTAIN THE CREDIT UTILIZATION RATIO
Credit utilization ratios indicate the percentage you spend from your credit limit. It is ideal to keep the credit utilization ratio below 30%. Having one credit card allows you to have a limited amount from which you can purchase without decreasing the credit utilization ratio. However, with multiple cards, the transaction limit increases without having much effect on the utilization ratio. Multiple credit cards facilitate the maintenance of CUR.
5. FINANCIAL SECURITY
Having multiple credit cards provides you with financial security. In case one of the credit cards is blocked or you are not able to use it, that time you can use your other credit cards to make purchases.
DISADVANTAGES OF HAVING MULTIPLE CREDIT CARDS
Having multiple credit cards comes with a lot of advantages, however, it has some disadvantages too.
1. DIFFICULTY IN MANAGEMENT
Multiple credit cards come with their own separate set of terms and conditions, interest rates, fees, multiple billing cycles to keep in mind and multiple bills to be paid. This can be very difficult to handle without proper planning.
2. INCURRING UNNECESSARY DEBT
Oftentimes we tend to overspend with multiple credit cards. It can be helpful in case of emergencies but you may face difficulties if you spend more than your repaying capacity. It is important to be conscious while making purchases with multiple credit cards and to maintain a good credit utilization ratio.
HOW TO MANAGE MULTIPLE CREDIT CARDS
You can apply for multiple credit cards at once as each application is reviewed and approved separately. However, with multiple cards, it’s important to be aware of the challenges and know how to manage them.
1. KEEP TRACK OF ALL THE CARDS
While having multiple credit cards it gets difficult to remember their names, terms, credit limits, interest rates, etc. Keeping a list will ensure that you do not overlook anything important.
2. UNDERSTAND THE TERMS AND CONDITIONS
It’s important to check the terms and conditions for each of your credit cards thoroughly. The terms and conditions talk about the interest rates and also the fees. It can be accessed through the document given to you and is also available online.
Credit cards also provide many rewards and cashbacks which vary according to the terms and conditions.
3. SET REMINDERS FOR PAYMENT DATES
To manage multiple credit cards effectively it’s important to have reminders about their due dates. Credit cards from the same bank will have the same due dates, however, if the cards are from multiple banks, then they will have different due dates. You can keep reminders of the due dates either by keeping a reminder on your phone or by setting up an automatic payment, whereby providing your savings account number along with the IFSC code to the credit card issuer will automatically debit the amount from the account provided by you.
It’s important to pay the due amounts on time because if you miss even one payment it will affect your credit score.
4. REVIEWING CREDIT SCORE AND CREDIT CARD TRANSACTIONS
Having multiple credit cards can make it difficult to keep track of all the transactions made by you. Sometimes the cards can be owned by multiple family members and it can lead to confusion. It is recommended to keep an eye on the credit score as well as all the transactions to ensure that there are no fraudulent transactions and you are not incurring a debt that is hard to repay.
CONCLUSION
Having multiple credit cards has its advantages and disadvantages but it entirely depends on the user. With proper management, understating of the terms and conditions of each card, paying the dues on time, and maintaining a good credit utilization ratio you can reap maximum benefits from multiple credit cards. However, in case it’s difficult for you to manage multiple credit cards its better to stick to one card.
This article is written by Purbasha Parui, a 1st-year law and finance enthusiast from BMS College of Law, Bangalore.
