Credit cards are useful as they reduce the dependency on cash transactions. You can do a transaction and then pay for it later when the credit card bill is generated. As such, credit cards allow you credit transactions. Moreover, you also get attractive rewards, discounts, cashbacks, and other privileges when you transact using a Icici credit card. These benefits have made credit cards very popular and many individuals often hold more than one credit card. But is it a good idea to take multiple credit cards?
Multiple credit cards are allowed to those individuals who, according to lenders, have a good financial position and are in the position to pay for their credit card dues. Multiple credit cards have definite advantages but there are some drawbacks too which should be kept in mind. Let’s assess both the advantages and disadvantages of owning multiple cards –
Advantages of multiple credit cards
- Different card for different use
Credit cards are categorized depending on the purpose for which they are designed. There are travel cards, shopping cards, lifestyle cards, premium cards, corporate cards, etc. Each card provides the maximum benefits if it is used for its specified purpose. For instance, travel cards give great travel-related privileges while shopping cards allow great discounts on everyday shopping. As such, having multiple cards enables you to enjoy the maximum possible benefits on different types of transactions that you do. You can use travel cards for travel bookings, lifestyle cards for dining out or going to the movies, etc. and earn good discounts and privileges.
- Increase your credit limit
Every credit card comes with a credit limit which is the maximum limit of credit that you can use on the card. When you have multiple cards your credit limit increases. The increased limit helps if you want to make a big-ticket purchase and one card’s credit limit is not enough.
- Reduce your credit utilization ratio
When you have one card and you maximize the use of the card’s credit limit, your credit utilization ratio becomes high. This has a negative impact on your credit score. With multiple cards, you can reduce your credit utilization ratio of each card and still have sufficient credit at your disposal. This would not affect your credit score adversely and even let you meet your financial requirements.
- Increase your credit score
If you own multiple credit cards and make regular payments of the card dues, your credit score would improve greatly. Thus, having multiple credit cards also increases your credit score if the payments are done duly.
Drawbacks of multiple credit cards
- Having multiple cards make managing them difficult especially when you are too busy to keep a track of the cards’ due dates of payments.
- If the cards are not managed effectively you can fail to pay the credit card bills on time. This failure would not only incur heavy interest charges, but it would also hamper your credit score.
- Your debts would mount if the card dues are not cleared and there are multiple dues to take care of.
The bottom line
The justification of owning multiple credit cards actually depends on the cardholder. If you can manage the different cards and pay their bills on time, having multiple cards is great. You can get a higher credit limit, enjoy the maximum possible rewards and also improve your credit score by maintaining the cards properly. So, assess the advantages and disadvantages of owning multiple cards and then make your choice.