Credit playing cards have develop into important monetary instruments in immediately’s world. The ease of accessing an interest-free short-term borrowing by credit playing cards not solely provides comfort to our way of life however a accountable utilization of this facility helps build a superb credit historical past and rating. The extra rewards, be it cashbacks, reward factors, or reductions, make greater financial savings attainable. No matter what the expense, from purchasing offline or on-line for your family wants, to paying payments and utilities, to charges and subscriptions, utilizing credit playing cards might be helpful and rewarding.
Considering how rewarding playing cards might be and the way totally different playing cards supply totally different varieties of advantages, there’s typically the question: what number of playing cards should you personal? Is there a great variety of playing cards? And if there’s, should you go for them? Let’s discover the solutions to a few of these questions.
Multiple playing cards might be rewarding in multiple approach. Here are crucial explanation why they might be a good suggestion.
Higher Credit Limit
Multiple credit playing cards collectively supply you a a lot greater credit restrict. A typical no-frills card could supply you a restrict of Rs 1 lakh. However, with two of them, your accessible restrict turns into Rs 2 lakh. Even if they’ve decrease credit limits of say Rs 75,000, put collectively, they provide you a restrict of Rs 1.5 lakh. This can come in useful throughout emergencies similar to sudden hospitalisation or pressing big-ticket purchases working into lakhs. Having a better credit restrict provides you freedom from having to rearrange the required giant corpus, both by your personal resources or by borrowing from associates and relations at a really brief discover.
Lower Card Utilisation Ratio
Ideally, one should keep away from utilising greater than 30-40% of 1’s credit card limits. However, it isn’t at all times straightforward to take care of this ratio with only one credit card. There are instances when you attain 80-90% of the credit restrict, triggering an alert message from the issuer. From the issuer’s perspective, excessive utilisation makes you excessive danger and could be the purpose for a decrease credit rating. An extra card means a better credit restrict. So, with a little bit administration, you can guarantee you don’t cross the utilization ratio threshold of 30%.
Better Credit Score
With a low credit restrict utilization ratio, your credit rating tends to get higher, making you eligible for larger loans sooner or later. Better credit rating merely means your credit-worthiness is robust, which is certainly useful in cracking a superb monetary deal. Further, managing two or extra credit playing cards easily by spreading purchases in addition to funds provides you enough observe to handle a number of traces of credit concurrently even in future.
With totally different billing cycles, your re-payment time span additionally will get unfold by practically a fortnight. This approach, whereas you use each the playing cards throughout the identical month, the compensation will get unfold out in two totally different months. This administration assures you are comfortable in terms of settlement of the credit card payments.
So, does this imply you should apply for that second card immediately? While there are a number of advantages of proudly owning a number of credit playing cards, they don’t essentially translate into making use of for one more credit card immediately. Here are a couple of conditions the place a further credit card might add on to your issues than resolve them:
a) If you are in debt: When already there’s a pile of debt that you have to clear, a further credit card will solely add to your debt burden. In such a state of affairs, it’s higher to keep away from it. Moreover, you could fall in need of the eligibility standards given your debt stress.
b) If you are planning to use for dwelling mortgage within the close to future: You want to take care of a wholesome credit rating for getting the house mortgage (or for that matter, any big-ticket loans) sanctioned. If you are considering of making use of for a house mortgage, it might be higher to not apply for any new credit merchandise for some time in order that your eligibility is greater. Also, making use of for a brand new credit card could cause a dip in your credit rating, thereby affecting your possibilities of getting a house mortgage.
c) If you assume you usually are not financially disciplined: Your first credit card would have already given you an thought about your monetary behaviour, potential or incapability to honour credit, and self-discipline in making well timed funds. If you usually are not assured about sustaining monetary self-discipline or have been unable to take action on account of extenuating circumstances, it’s finest to eschew another credit card.
There are causes to be cautious of holding a number of credit playing cards. Managing a number of billing and cost cycles might be tough. Monitoring spends throughout a number of devices might be tough as might be frequently scrutinising these payments. However, a second credit card can imply greater credit restrict, decrease utilisation, and higher rewards, together with a crash course in monetary administration. So, if you are positive you meet all of the required eligibility standards and if you are a disciplined consumer of credit playing cards, then there isn’t a purpose why you shouldn’t take into account getting that second card.
(The author is CEO, BankBazaar.com)