4 Reasons Why You Should Have A Second Credit Card

Picture this: While vacationing in Europe with your family, you take the time to enjoy pasta at an outdoor restaurant in Venice. At the end of your amazing meal, you hand the waiter your credit card. After a few moments, he returns and tells you that the card has been declined. The next few minutes are full of panic as you hunt for loose cash so thatyou at least have enough money to take you back to your hotel.

Emergencies like this can be easily avoided by carryinga second credit card. Credit cards are still an emergingtrend in India and they are slowly getting greater acceptance among a larger segment of the population. However, they still have quite a bit of catching up to do. Compared to the 350 million debit cards that are currently in circulation, the total number of active credit cards in India is only 19 million.  However, the acceptance of credit cards and their usage is definitely on the rise as is the trend of keeping more than one credit card. Some of the key reasons of why more and more individuals are opting for multiple cards are as follows:

1. As a backup option– Your primary credit card can be declined because of a variety of reasons. Many shops or eateriesdo not accept cards fromparticular payment processors (e.g. American Express and Discover/Diner’s Club cards are not accepted by many merchants)due to technical issues. In such cases, a second credit card can be a handy alternative for someone not used to carrying around much cash on their person.
2. For benefits – Different credit cards come with varying benefits. For example, HDFC’s Platinum Edge card earns 50% reward points when you dine out, while the MoneyBack Card offers 3X reward points on online expenditure. On the other hand, many of CitiBank’s and Standard Chartered’s credit cards offer you amazing discounts on dining. So, if your needs are sufficiently specialized, it might be worth having a second credit card to cover that part of your expenditure and earn the unique rewards you get for just using the card.
3. To improve your credit score – If you maintain a stable rate of spending even after getting a second card, your total expenditure is now being distributed between the two. So your credit to debt ratio would improve as your overall credit limit increases. This will bolster your credit score and help you negotiatea better (lower) rate of interest on future loans and improve your chances of being approved for future credit instruments such as loans/credit cards.
4. For financing sudden large expenses – In case of serious emergencies, getting hold of a large amount of cash can pose a problem. Suppose you have to catch an urgent flight, or a dear one needs immediate medical attention. The credit limit on your primary card may not be sufficient to make all the payments you need.As the credit limit of a card is a function of your income and usage, it is non-customizable. In such situations, having a second credit card is perhaps the only way out you might be able to split your expenses across the two cards without maxing either.

The cardinal rule remains the same: avoid making minimum payment on either credit card if you can paythe full due amount. Every time you defer payment to the next billing cycle, the interest charged on revolving balances increases. In addition, your credit score will also take a hit, which can be a bit of a problem in case you plan to apply for additional credit cards and loans in the future.

If you have decided to go for a second credit card, the following is a handy list of Dos and Don’ts…