The Pros and Cons of Using Multiple Credit Cards

Looking at the lucrative offers that come with the credit card, many of us are tempted to own more than one! Having multiple credit cards offers many benefits but has drawbacks, too. Financially disciplined people who can maintain all their credit cards responsibly can enjoy the advantages. However, those who are not can get trapped in multiple debts and jeopardize their credit health.

Here, we explain the pros and cons of using multiple credit cards. Go through the same and check whether you can efficiently manage several credit cards, or it can be challenging.

Using Multiple Credit Cards

Holding a range of credit cards with different features can unlock several advantages. For example, if you have a travel credit card, you can use it for funding your travel like buying air tickets, paying for excess baggage, etc. This credit card is not for routine expenditures like grocery stores. Hence, one of the causes of using multiple credit cards is to avail them for different purposes and earn more rewards.

Multiple Credit Cards: The Benefits

Here we list the numerous benefits of having many credit cards:

1. Lowers Credit Utilisation

Suppose you are using a single credit card to make all the payments. If your credit limit is Rs. 50,000/- and you use Rs. 40,000/-, your credit utilization will be 80%. However, if you are using other cards too, you will have a bigger credit limit. This will make your utilization ratio smaller. Let us take the same example. Consider having another credit card with the same limit of Rs. 50,000. You are using Rs. 10,000/- from it. Now your credit limit for both the cards will be Rs. 1,00,000. Your total utilization is Rs. 50,000/-. Your credit utilization will come down to 50%.

If you are thinking how much credit card limit should I use, then the ideal utilization is of 30%.

2. Improved Credit Score

If you have several credit cards, you can augment your credit score by paying your outstanding on time. A good credit score helps you avail lucrative financial facilities. You can increase your creditworthiness and allow yourself several credit lines.

3. Increases Credit Limit

As mentioned earlier, holding many credit cards means having a higher credit limit. Ensure to use the available credit responsibly and not overspend.

4. Good for Emergencies

If one of your credit cards is unavailable or missing, you can use another for making expenses. This provides you safety net during an emergency need for funds.

5. Rewards and Cashbacks

Multiple credit cards bring you a host of rewards and cashbacks. You can redeem the points and enjoy all the perks and benefits.

Multiple Credit Cards: The Drawbacks

Having many cards can also pose some difficulties. Here, we list them all.

1. Difficult to Manage

It is a hassle to manage all the credit cards. You will have to keep track of every card, the due date, making payments for different cards, and more. With so many things, there are high chances to miss some payments. This can bring your credit scores down.

2. Collect Debt

Multiple credit cards will come with enhanced credit limits. This means you might be tempted to spend more. If you overspend, you will be under debt. So, the cardholders are requested to spend cautiously.

3. Risk of Decreased Credit Score

If you do not pay the dues for even one of the credit cards timely while paying the rest, your credit score will drop.

4. Exposure to Theft or Fraud

Having many cards makes you more exposed to theft or fraud. The hackers may steal your identity, pretend to be you, and shop for expensive items.