Over the past few years, the demand for credit cards as an instant financial tool has become immense. Not only because of its convenient payment option but also for several other advantages like offers and discounts that it brings along. However, credit card benefits can differ across the product line as well as lenders. While some cards provide cashback on certain brand purchases, others may offer reward points on hotel bookings.
Therefore, it is no surprise that individuals can go for multiple cards to avail a wide range of facilities. Nonetheless, there are some advantages as well as disadvantages of carrying several cards. Here are the pros and cons-
Advantages
- Sufficient supply of fund
One of the prime advantages of having multiple credit cards is having a significant financial backing to meet various financial obligations. In terms of large expenses, the lower credit limit or the given limit on one card may not be able to fulfil all financial necessity, numbers of cards can conveniently cover it. So, depending on users’ need and repaying capacity, they can avail more than one cards if required.
- Beneficial to maintain a low utilisation ratio
When using credit cards, it is vital to keep the utilisation ratio low, not more than 50%, as it can affect one’s credit rating. However, with one card, it may become difficult to maintain that limit after meeting all financial needs. Therefore, individuals can look for multiple cards as it can help to increase the permitted limit to spend. For example, if one card has a credit limit of Rs.50,000, use should spend Rs.15,000 on it at one time to maintain a good utilisation ratio.
Nonetheless, with two such cards, borrowers can avail credit card benefits of up to Rs.30,000 and cover their financial requirement without affecting the CIBIL score.
- Multiple reward programs
If individuals choose to keep different credit card types like cashback card, shopping card, travel card, etc., they can avail numerous incentives together. By redeeming these rewards, cardholders can enjoy discounts on future purchases to make a cost-effective expense.
- Improve credit score
As credit cards provide impactful insight into users’ debt behaviours, multiple cards can be beneficial to improve credit rating in several aspects. With regular and consistent on-time repayment on every card, individuals can either build up or rebuild a healthy credit profile. Also, as mentioned earlier, its assistance in maintaining a low utilisation ratio is also beneficial in improving the score.
Disadvantages
- Debt risk
Multiple cards can lead borrowers to excessive spending, accumulating substantial debt in no time. Therefore, individuals who tend to spend more may create outstanding debt beyond their repaying capability. In such cases, they should not opt for multiple credit card types.
- CIBIL score risk
Although owning, and cleverly utilising, more than one card can be useful to develop an excellent credit score, it can also turn out to be opposite if borrowers do not know how to use credit cards wisely. Moreover, from financiers’ or bureaus’ perspective, multiple cards can represent higher default risk, causing a drop in rating.
- Difficult to keep track
Furthermore, multiple credit card benefits can be attractive, but it may also become challenging to manage. More than one card also comes with multiple payouts and repayment dates that can be difficult to remember as well.
As an alternative method, individuals can opt for all-in-one cards like Bajaj Finserv RBL Bank SuperCard that caters to most spending habits and offers numerous incentives.
Moreover, this financier also indulges in a faster application process by providing pre-approved offers. Borrowers can find these offers also on other products like personal loans. They can look at their pre-approved offers by giving phone numbers and names online.
To sum it up, individuals who wish to avail various credit card benefits, owning multiple cards can be a wise option. However, borrowers need to assess the pros and cons of having multiple credit cards beforehand as they are going to be exposed to higher debt risk.
