Want To Own Multiple Credit Cards? Check Five Key Factors Before Applying
Applying for multiple cards in a short duration will negatively affect your credit score.
A credit card is a suitable instrument for meeting your financial needs when you run out of cash. Though using a credit card can be rewarding with all the attractive deals and discounts, it also comes with a fair share of responsibilities.
If you can use a credit card judiciously and pay all your dues by the due date, you can derive great benefits from your credit card. On the other hand, the unrestricted use of credit cards may also lead to a debt burden.
This financial burden may increase when you own multiple credit cards. Owning multiple credit cards is nothing new these days as the card issuers are offering customised credit cards to meet the needs of different categories of customers. From travel to shopping, customers are opting for multiple credit cards to reap the benefit of attractive deals. However, owning multiple credit cards requires financial discipline.
Are multiple credit cards suitable for you? Here are some of the factors you must consider to decide whether you should apply for multiple credit cards.
Factors To Consider
Impact On Credit Score: Whenever you apply for a credit card, it results in a hard inquiry on your credit report. A hard inquiry can be detrimental to your credit score. However, if you have a good credit score and history, it can significantly minimise the impact of the hard inquiry. Applying for multiple cards in a short duration will negatively affect your credit score. At the same time, when you own multiple cards, missing payments for any credit card may also affect your credit score.
Managing Multiple Credit Cards: If you plan to own multiple credit cards, managing payments for different cards could be difficult. Keeping track of multiple due dates and making payments without any default needs careful planning. Any default would lead to additional fees, interest charges and impact on credit score.
Credit Utilisation Ratio: The credit-utilisation ratio shows the percentage of total credit available on a credit card that you're currently using. It is one of the key metrics that impact your credit score. Usually, it is recommended to keep the credit utilisation ratio below 30%. If you have multiple credit cards, you need to use them smartly to keep your credit utilisation ratio low on all the cards. This will help you maintain a healthy credit score.
Potential For Undesirable Debt: Unrestricted use of credit cards may lead to a financial burden. Pending dues across multiple credit cards may accumulate into a huge debt over a long period. If you want to have multiple credit cards, be sure to use them wisely to avoid a financial crisis in the future.
Interest-Free Period: The interest-free period on a credit card is the time between a purchase and the due date for clearing the entire outstanding balance. During this period, no interest is charged if you pay the entire outstanding balance by the due date. By using multiple credit cards with different due dates spread across a month, you can make the most of the interest-free period on each credit card.
