Having multiple credit cards is normal. People keep separate cards for different purposes such as for shopping, traveling, dining, entertainment, etc. But keeping more than one card can have tremendous impact on your financial well-being. The impact can be negative as well as positive. Before toting with multiple credit cards, one must determine how many cards you should ideally have in your wallet. Below given are some pros and cons of owning multiple credit cards-
Pros of Owning Multiple Credit Cards
Reap More Rewards– The biggest benefit of owning multiple credit cards is that you can tailor your credit card usage to take advantage of various reward programs. You can maximize the rewards and cashback offers on various categories such as shopping, travel, etc. by using more than one credit card. On different credit cards you get different offers and rewards points. There are credit cards available that are for the specific purpose and you can adapt them according to your lifestyle. For example: If you travel abroad often then you can get a card that specifically offers rewards on traveling or if you find yourself shopping frequently then you can get one card for shopping rewards.
Flexibility of Bill Payment– Instead of piling the debt on one card, you can spread your payments across different credit cards. By spreading the payments you can take advantage of different interest rates on different credit cards to simplify your credit card debts as much as you can. In the long run, it will help you to keep your debt utilization ration low. For example: You can use your higher APR card to pay off your day to day shopping bills to get good rewards whereas you can use the lower APR card to pay the amount over a period of time. You can also keep separate cards for personal and professional expenses to keep your life and finances more sorted. Some banks also offer cards with interest free grace period. You can transfer the amount to be paid over a course of month to save interest cost.
Backup Card for Emergency– There may be times when you need backup card when an emergency strikes. For example- You’re holidaying in some different country and while making the payment at a restaurant, the salesperson informs you that the payment from your card is not possible due to some unknown reason. In such cases, your backup cards can tide you over and will save your from such embarrassments. Also, if you lost your card or it gets stolen, you backup card will come to your rescue.
Cons of Owning Multiple Credit Cards
Tough credit cards management– It’s difficult to keep a track of all the credit cards together. You have to keep more bills and remember their due dates. People who own multiple cards usually forget to pay the bills of all the cards on time. Not keeping track of your card will lead you to a debt trap. Having multiple cards is not suitable for busy and unorganized people. One should keep fewer cards to simplify their credit card management.
The Debt disaster– A spendthrift person should avoid keeping multiple credit cards, in all probability you will end up blowing your budget. Your purchasing power will increase with multiple credit cards, which will definitely drain out your personal finances. More credit cards encourage reckless spending for the shopaholics who spends recklessly on shopping using their credit cards. This will completely take your budget off track. There is an unfortunate tendency with people to treat credit card as the extra cash. Hence, misusing your credit card can lead you to the debt disaster.
Risk of Bad Credit Score– Credit score is the most important thing to consider before you own multiple cards. Lenders have set a certain standard rating for checking a credit score. The rating of 700 and above is generally considered good. To maintain a good credit score, it is necessary to make loan payments and credit card dues on time. Owing multiple credit cards can have an adverse effect on your credit score. With multiple credit cards you will be indulged in excessive buying which will eventually increase your debts and lower your credit score. This will result in increasing your debt utilization ratio and wrecking your credit score. Establishing a good credit history is must for reaping the benefits of having a good credit score.
Credit cards are a great financial tool if you use them for convenience and clear up the dues before the interest cost kicks in. But if you are an undisciplined shopper, having more than one credit card can turn into an embodiment of pure evil for you. With several credit lines, you will tend to spend more than what you actually earn and accumulating an exorbitant amount of debt. Consolidating multiple cards’ balance into one card can also help you to pay the balance with a low rate of interest. So, there’s no point in getting additional credit cards unless you need it for a personal or business purpose. If you keep multiple credit cards, you must make sure you manage them responsibly and pay off the monthly balance of each card on time.
Useful Article: 4 Reasons Why You Should Have A Second Credit Card