Many individuals, even business entities rely on credit to fulfil their financial needs. There are different ways in which one can get a debt by paying interest. However, having a credit card helps an individual to use the money first and allows him/her to pay later without any interest (if paid within the due date). This unique benefit of the credit card is what makes people feel like having one.
There is a growth in the number of people opting for a credit card every year and some are even having multiple cards. Using multiple credit cards may be easy and convenient but it becomes a burden when you lose control over it. It's necessary to know the pros and cons associated with the usage of multiple credit cards before going forward.
Privileges Of Having Multiple Credit Cards
Maximum Utilisation Of Reward Points
This is the key benefit of having multiple credit cards. Most banks have tie-ups with fuel, retail, e-commerce companies, etc., to offer exciting benefits to customers. When a cardholder uses the card at the select merchant outlets, he/she will receive reward points that can be redeemed against a product or gift vouchers. For instance, using a co-branded card like petrol-card for filling petrol or diesel gives additional reward points.
Can Enhance Your Credit Score
While calculating the credit score, CIBIL (Credit Information Bureau India Limited) validates your 'Credit Utilisation Ratio'. This ratio measures an individual's debt against the credit limit. For instance, say your monthly expenses are Rs 20,000 and your credit card limit is Rs 40,000, then your credit utilisation ratio will be 50%. Here, using multiple cards reduces the credit utilisation ratio and enhances the credit score.
Acts As A Backup When You Lose Your Card
In case of loss or theft of a credit card, it takes five or more working days to get the new card. With multiple cards, one doesn’t have to compromise on his regular transactions as he has multiple cards with him.
Disadvantages of having multiple credit cards
Some people find it difficult to manage multiple credit cards. Having multiple cards mean multiple bill payments and due dates. People who're poor at debt management may end-up missing the payment date which leads to unnecessary charges and a remark on the credit history. However, one can opt for the auto-pay option in which the due amount gets deducts automatically from the savings account every month.
Having multiple credit cards may have a negative impact on the financial status as an individual may spend more and not be able to repay on time.
It doesn't matter whether you own single or multiple cards, the only important thing is how wise you're in utilising them in order to improve your financial status. Thus, it is important to consider the above-said factors if you are planning to have multiple credit cards.
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