Pros and Cons of Having Two or More Credit Cards

Despite the increased use of credit cards among Indians, a significant proportion of the population still views them as a means of falling into a debt trap. Even individuals who already have a Yes Bank credit card are reluctant to apply for more cards for fear of accruing unsustainable debt, according to a recent study. However, for those who are financially responsible, the advantages of having many credit cards always exceed the disadvantages.

The following is a list of the advantages and disadvantages of having multiple credit cards:

Advantages of having two or more credit cards include-

# Increases the number of reward points you earn: Most credit cards are built with the specific needs of users in mind. While some credit cards provide higher reward points on fuel purchases, others offer higher reward points on other purchases such as air travel or shopping, among other things. For example, a gasoline card, in addition to waiving the fuel levy, may allow you to earn more reward points on your fuel purchases. On the other hand, a lifestyle card or a travel credit card would only provide partial remission of the fuel surcharge. In other words, if you spend a significant amount of money each month on refuelling for commuting, a petroleum Yes Bank credit card for refuelling transactions will save you more money than any other credit card option.

# Overcomes reward point caps: Credit cards frequently have a limit on the total amount of reward points that can be earned in a given billing cycle. This is known as a reward point cap. It is possible to route transactions through other credit cards once you have used up all of the reward points on one of the cards in your primary collection.

# Provides a backup in the event that your primary card is stolen or lost: Typically, it takes at least three days to acquire a replacement credit card in the event of theft or loss of the original credit card. If you find yourself in this situation, you may be compelled to make payment with your Yes Bank credit card or debit card. Multiple credit cards would allow you to reroute payments to other credit cards, allowing you to maintain a stable level of liquidity.

# In the long run, having many credit cards might be beneficial to your credit score. This is because they can help you minimise your credit usage ratio. This ratio is the percentage of the overall credit limit that you have used. Lenders view persons who have a credit utilisation ratio greater than 30% to be credit hungry, and they tend to lower their credit score when they exceed this threshold. The opposite is true: maintaining a steady credit utilisation ratio of less than 30% boosts your creditworthiness, which in turn leads to a higher credit score over time.

Consider the following scenario: you have a credit card with an Rs 80,000 credit limit, and you make payments totalling Rs 40,000 in a month. Your credit utilisation ratio for that month would be 50 percent, according to the credit bureau. Your credit-utilisation ratio for that month would have dropped to approximately 29 percent if you had another card with a higher credit limit, such as Rs 60,000. (approx.). As a result, having a number of Yes Bank credit card can help you keep your credit utilisation ratio under 30% while also progressively improving your credit score over time.

# Maximises the benefit of the interest-free period: The interest-free period of a credit card refers to the time period between the first day of the card’s billing cycle and the day on which the outstanding balance must be paid in full. Transactions completed during this period are not subject to interest charges as long as the entire amount is paid in full on the due date. A transaction’s interest-free term can last anywhere from 18 to 55 days, depending on when the transaction was completed at the time of writing. Having various credit cards with billing cycles that are spaced out throughout the month will assist you in spreading out your expenses.

The disadvantages of having two or more credit cards are as follows-

Difficulties while using and managing numerous credit cards: Using several credit cards will result in the generation of multiple credit card bills and due dates. People who have difficulty remembering their repayment schedules and due bill dates may find themselves in the position of needing to make late payments. This may result in them incurring high finance costs and late payment fines, as well as causing their credit profile to be negatively affected. To avoid such scenarios, consider setting up a standing instruction to have your overdue bill amount automatically deducted from your savings account each month.

With credit cards offering enticing offers and discounts throughout the year, many credit card members wind up making card purchases only for the purpose of taking advantage of those card benefits. # Overspending risk, As a result, having many credit cards may put folks who lack financial discipline at risk of spending more than they can afford.

# Obtaining a new credit card application or enquiring about a new Yes Bank credit card will result in a credit report check and hence credit score drop in the short term- This is because such credit report retrievals are referred to as “hard inquiries,” and they have the effect of lowering your credit score by a few points. However, this is merely a short-term loss in terms of money. As long as you continuously pay your bills on time and keep your credit usage ratio under 30%, your credit score will begin to steadily improve after a couple of months.

So, overall, the advantages of having two or more credit cards tend to outweigh the associated risks or cons, right? It’s all about using and managing two or more cards prudently, and else, even one card can ruin your credit score and damage financial health in multiple ways!

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