Kolkata: Credit cards are an useful financial tool but only in judicious hands. If handled injudiciously, credit cards can even lead to a debt trap. Assuming one uses them wisely, it can be quite useful to keep a couple or more credit cards since there can be quite a few benefits. Let’s have a close look.
Wide array of benefits
Different credit cards carry different types of benefits. While some offer cashback and reward points on grocery purchases and general shopping, some incentivize dining out, some offer incentives on buying airline tickets or movie tickets. Some allow complimentary offers at airport lounges. Some offer benefit for purchase of petrol and diesel etc. Therefore, by keeping a few credit cards, you can virtually cover almost all the sectors where you can get benefits.
Improved credit utilisation ratio
The amount of credit one is using compared to one’s total credit limit is called the utilisation ratio. It is significant in determining the credit score. Experts advise that it should be not exceed 30% — in other words it should be used to run up bills within 30% of the credit limit of a card. It is easy to understand that by keeping more than one credit card, one can increase the credit limit without raising the credit utilisation ratio.
Emergency back-up
There is another significant benefit of keeping more than one credit card. Even if one is stolen, the other cards can be of use in emergency situations.
However there are potential dangers in using multiple credit cards. The following should be kept in mind.
Higher temptation: There can be a distinctly higher temptation to overspend if there are more than one card in the pocket. One has to keep in mind that vene if there are 10 cards, the repayment has to be done from only one individual or one source of income.
Higher maintenance cost
Many credit cards are not free and entail annual fees. If you own multiple credit cards, chances are high that you will be paying a significant annual fee for some of them. Multiple credit cards can often mean tracking multiple sources for outstanding due and due dates and payment schedules. if you miss the payment of anyone, the impact is adverse and hits your credit score.
Therefore, whether you will carry two or more credit cards will depend on your level of maturity as a spender. If you can resist the temptation to spend and is organised enough to track bills and dues maturely, you can think of having more than one credit card but these should be chosen in sync with your spending patterns.