How Many Credit Cards Should You Have?

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While it would be ideal to replace your bulky wallet with one that only has credit cards so that it’s much easier to carry, but how practical is that idea? The world is turning digital and choosing a card over carrying cash seems logical but one often can’t help but wonder as to how many credit cards should you carry? 

With each passing day, the number of people using credit cards in the world is increasing. With its umpteen benefits like cashback, manifold rewards like travel benefits, and increased purchasing power; credit cards are becoming hugely popular with most users carrying at least two cards in their wallets. This begs the question: is it really ideal to have more than just one card? Or what exactly is the right number of cards you should own? 

Well, if you are a shopaholic who cannot keep a tab on their spending, or if you are finding yourself overburdened by credit debt, then the answer is obviously, NO! However, the rest of the people might find it a bit more confusing to answer this question. There is no hard and fast rule as to the number of cards you can have. As long as your credit card provider approves your application for a credit card, you can safely own one. It depends entirely on your convenience and spending capacity. But to make it a little simpler, let’s discuss the certain advantages and disadvantages of having credit cards: 

Advantages of Credit Cards

Disadvantages of Credit Cards

Convenience

Temptation

Increased spending capacity

Possible debt

Convenient for buy now and pay later

Increasing credit card debt can affect credit score

Benefits and rewards

Added charges and fees

Boost credit rating

Credit card fraud

Now that you are all caught up with the pros and cons of having a credit card, let’s discuss-

How many cards should you have?

To answer this question simply- one should at least have one credit card but it is safer to have two. One should ideally own at least two credit cards, each from a different network vis-a-vis Mastercard, American Express, Visa to name a few. The reason for having cards from different networks is that each company offers a myriad of different rewards and benefits.

However, remember that the number of cards you own is a personal choice that depends on your personal circumstances and your individual needs.  

If you are new to the world of credit cards

As a beginner, start with just one credit card, a “secured” card, and proceed to get another one once you are comfortable and deem it necessary to own another credit card. Apply for a new one only when you have proven to yourself that you make your payments on time and can afford to pay your bills completely at the end of the month. 

If you want to improve your credit score

While this is not the apt reason to own a credit card, but it can definitely help lower your credit score. 

If you plan to invest in a new property or buy a car

Do not apply for a new credit card. Stick with the ones you already have. Don’t get a new card for a period of at least six months after applying for a loan. The new card will lower your credit score and you certainly want it to be at its best when applying for a loan for your dream car or your family’s new abode. Banking and other financial institutions closely scrutinize whether you have credit debt, mortgage and if you paid them off timely. 

Is it a good idea to have multiple cards?

You are probably worried about your credit score whilst thinking about owning multiple credit cards. That is quite a common concern but owning multiple credit cards is not a hazard. Most likely it will only help your credit score, ensuring that your debt utilization ratio is low.  

Consider the following example to understand this better- If you own a credit card with a credit limit of 5000 USD and you spend 4000 USD a month charged on your credit card, then, in that case, your debt utilization ratio, which is the amount of available credit that you end up using is 80 percent. 

When your credit scores are concerned, a higher debt utilization ratio is most likely to damage your credit score. This might seem a little bizarre to you. Why should you be penalized for using most of your credit limit? But unfortunately, that’s how the credit system works.

In order to improve your credit score, it is recommended that one must avoid using more than thirty percent credit, per card, at a time. If you own several different cards, it would help to spread your expenses of 4000 USD across all of them, thus maintaining your debt utilization ratio and keeping it fairly low. 

Benefits of Having Multiple Credit Cards

There are several benefits of having multiple cards as more often than not, they can come to your rescue.

Different cards have different benefits: Most credit cards have a reward system associated with them. Having different cards will enable you to the maximum amount of rewards associated with each card, for every purchase you make. For example, some cards offer the option of earning cash back on every purchase or selected items, while others work on a point system that can be redeemed for making future purchases.

Choose the card that offers a flat cash back of a certain percent on purchases. This will be the primary card that you should use in case other cards don’t offer a higher reward. For instance, one of your cards might be running an offer that allows you to earn a five percent cash back on all your grocery shopping in the months of September, October, November, and December. For the rest of the year, it offers no special bonus offers, so you might want to choose your primary card. 

If your credit card is compromised: Under some circumstances, your credit card provider might freeze your card or cancel it if a potential fraud threat is detected or if they suspect that your account number has possibly been compromised. 

In such a condition you might not be able to use your card until the credit card company confirms that the card was not stolen or the purchases were indeed made by you. They will verify personal information from you to confirm your identity and the safety of the card before unblocking it. 

In such a circumstance you will have to make your purchases using a different card. Therefore, having multiple credit cards will prove beneficial in this scenario since the company will take at least a few days before they unfreeze your card. You might even have to be issued a new account number, meaning you will be left without your card for at least a few days until your new card arrives.

If your credit card is stolen: Another probable worst-case scenario is that you lose your credit card or it is stolen. As a precaution, it is always a good idea to have multiple cards so that you are not stuck without a card in case of emergencies. 

As a result of these probable cases, it is always a good idea to have multiple credit cards. If however you only have one credit card, have a backup for yourself by having alternate payment options like debit cards or some cash. 

Drawbacks of Multiple Credit Cards

Having multiple cards will only work as long as you manage them well. Credit cards are another name for convenience as they allow you to make easy payments with the help of easy instalments. But despite having this option, you need to strategize well since you can’t put all your expenses on credit. It needs meticulous management that is in alignment with your monthly income. Messing this up could land you deep in credit card debt.

If you love shopping and have a hard time restraining your urges, it will be beneficial to only have two cards- a primary card and one for emergencies. Too many credit cards can ruin your credit score but at the same time, untimely payment can lead to penalties. Hence it is always better to ask yourself these questions before applying for another credit card:

  1. Will you efficiently manage having multiple credit cards and their bills?
  2. Will you actually be able to utilize the rewards offered by your cards?
  3. Is the annual fee of the card more than the benefits it offers?

The Bottom Line

Having multiple credit cards is quite advantageous, but you will only be able to reap its benefits as long as you manage them efficiently. To make sure that having more than two cards works in your favour rather than against you, closely know and understand their individual benefits, the due date of payment on each card as well as your credit limit on each individual card.

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