How many Credit Cards are too many? Have you ever wondered if having multiple Credit Cards is great idea? We’re here to help answer these questions.
There is no magic number when it comes to the number of Credit Cards you can have. Having multiple Credit Cards can actually help improve your Credit Score.
Wondering what difference a good score makes? Well, your Credit Score is a number in the range of 300 to 900. Your score is determined by your credit behaviour, or more simply put, it tells how responsible you’re with credit. Missed payment deadlines and having a huge debt are signs of poor Credit Score.
Why is your score crucial? Let’s say you are in urgent need of cash for renovating your home and your savings have tanked due to a recent emergency. Getting a Personal Loan is your savior when it comes to fulfilling such financial commitments without breaking the bank!
Now, once you decide on taking a Personal Loan and apply for credit, banks will check your Credit Score to gauge your creditworthiness. A 750+ score is sure to get you the best offers and even low interest rates!
Additional Reading: Sure Ways To Become A Credit Score Guru
Now that we’ve established the significance of having a good score, let’s see how using multiple Credit Cards can go a long way in fetching a shiny score!
When credit bureaus such as Experian calculate your credit score, the number of credit cards you have is of little consequence. However, the way you use your cards can make a huge difference. Let’s take a look at your Credit Score components.
- Payment history comprises 35%
- Amounts owed holds 30%
- Length of credit history determines 15%
- Credit mix contributes to 10%
- New credit makes up of 10%
Additional Reading: What Are The Components Of Your Credit Score?
Curious about how having multiple Credit Cards affects your score, read on.
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Payment History
When it comes to payment history, how timely you are with paying off your Credit Card dues affects your score directly. Paying on time and in full is a recipe for a good score!
Having too many cards can turn out to be problematic if most your cards have the same payment due date. However, this can be avoided by automating your payments. Therefore, no matter how many cards you have, make sure you’re on time with your bill payments.
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Utilisation Rate
Credit utilisation is the amount of credit you use in comparison to your credit limit. If your credit utilisation is 30%, it means you’re using less than 30 percent of the total credit available to you. The lower your credit utilisation ratio, the better for your Credit Score.
So in this case, having multiple credit cards can come in handy by increasing your overall credit limit. As every new Credit Card boosts your total credit limit, adding a card to your kitty decreases your debt-to-credit ratio or the amount you owe as opposed to the amount you’re allowed to use.
For instance, let’s say you just have one Credit Card with a Rs. 25,000 balance and a Rs. 50,000 credit limit. Your utilisation rate on the card will be 50%, in turn negatively impacting your score.
On the other hand, let’s say you have 3 cards with a Rs. 20,000 balance in all and a credit limit of Rs. 60,000 on each, your utilisation drops and is generally much better for your credit.
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Length of Credit History
If you’ve had credit for many years, it can make a big difference to your Credit Score. If you’ve got multiple cards, rest assured that they impact the length of your credit history. The longer a credit account has been open and active, the better it is for your score.
So, if you’ve been considering closing your old Credit Card accounts, think twice. We suggest you keep using old cards to pay for groceries or utility bills! That way you can keep making use of them, besides boosting your score!
Having multiple Credit Cards directly affects the above components of your Credit Score that make up the lion’s share, a good 80% of your score. Using different cards that come with different rewards and bonus programs can help your savings.
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For instance, Card A might come with complimentary domestic as well as international lounge access while Card B comes with 10 times reward on your entertainment needs! Similarly, Card C might be best-suited for your fuel needs!
So, certain Credit Cards offer benefits that others don’t, and having more than one Credit Card in your wallet lets you take advantage of the benefits you want.
Additional Reading: Are Unused Credit Cards Affecting Your Finances?
The number of Credit Cards you should have is not fixed. It generally depends on your financial footing and your credit behavior. However, irrespective of how many cards you own, be sure to manage them responsibly.
Adopt safe practices such as paying on time and in full and make sure to keep your credit utilisation below 30% of your available credit limit. Once you’re finances are back on track and you’re getting better at managing your credit well, you’ll see your Credit Score soaring up.
If you’re looking for other forms of credit such as Personal Loans or Investments to add to your financial portfolio, we’ve got everything finance related under one roof! What are you waiting for? Get started!