With a low credit limit utilization ratio, your credit score tends to improve, making you eligible for larger loans in the future.

Credit cards have become essential financial tools in today’s world. Easy access to short term interest free borrowing through credit cards not only adds convenience to our lifestyle but responsible use of these facilities helps in building good credit history and grades. Additional rewards, whether it’s cashback, reward points, or discounts, make even bigger savings possible. No matter the expenses, from offline or online shopping for your family needs, to paying bills and utilities, to fees and subscriptions, using credit cards can be beneficial and beneficial.

Given how rewarding cards can be and how different cards offer different types of benefits, there is often a question: How many cards should you have? Is there an ideal number of cards? And if there are, should you go for them? Let’s explore the answers to some of these questions.

Multiple cards can be rewarding in more ways than one. Here are the top reasons why it’s a good idea.

higher credit limit

Multiple credit cards combined give you a much higher credit limit. A typical no-frills card may offer you a limit of 1 lakh rupees. However, with two of them, your access limit becomes 2 lakh rupees. Even if they have lower credit limits say Rs 75,000, combined, they give you a limit of Rs 1.5 lakh. This can come in handy during emergencies like sudden hospitalization or urgent big ticket purchase of up to lakhs. Having a higher credit limit gives you the freedom to have to arrange the required large pool, either with your own resources or by borrowing from friends and relatives in a very short time.

Less card usage

Ideally, one should avoid using more than 30-40% of their credit card limits. However, it is not always easy to maintain this percentage with one credit card. There are times when it reaches 80-90% of the credit limit, which causes an alert message from the issuer. From the issuer’s point of view, high usage makes you a high risk and may be the cause of a low credit score. Supplementary Card means a higher credit limit. So, with a little management, you can be sure that the 30% usage rate threshold is not exceeded.

Better credit score

With a low credit limit utilization ratio, your credit score tends to improve, making you eligible for larger loans in the future. A better credit score simply means that your creditworthiness is strong, which is really helpful in breaking a good financial deal. Moreover, smoothly managing two or more credit cards by spreading out purchases and payments gives you enough practice to manage multiple lines of credit simultaneously even in the future.

Easier to repay

With different billing cycles, the time period for re-payment is also spread out to approximately two weeks. This way, while you use both cards during the same month, the payment is spread over two different months. This management assures that you are comfortable when it comes to settling credit card bills.

So, does that mean you should apply for that second card right away? While there are many benefits to owning multiple credit cards, they don’t necessarily translate into applying for another credit card right away. Here are some situations where an additional credit card can add to your problems instead of solving them:

a) If you owe: When there is already a pile of debt that needs to be settled, an additional credit card will only add to the debt burden. In such a case, it is better to avoid it. Furthermore, you may not meet the eligibility criteria due to your debt stress.

b) If you plan to apply for a home loan in the near future: You need to maintain a good credit score to get a home loan (or for that matter, any big-ticket loans) penalized. If you are considering applying for a home loan, it is best not to apply for any new credit products for a while until your eligibility is higher. Also, applying for a new credit card may lower your credit score, affecting your chances of getting a home purchase loan.

c) If you think you are not financially disciplined: Your first credit card has already given you an idea of ​​your financial behavior, your ability or inability to honor credit, and the discipline of making timely payments. If you are not confident in maintaining financial discipline or are not able to do so due to extenuating circumstances, it is best to avoid another credit card.

There are reasons to worry about carrying multiple credit cards. Managing multiple billing and payment cycles can be challenging. Monitoring spending across multiple tools can be challenging as these invoices can be checked regularly. However, a second credit card can mean a higher credit limit, less usage, and better rewards, along with a crash course in financial management. Therefore, if you are sure that you meet all the required eligibility criteria and if you are a disciplined user of credit cards, there is no reason why you should not consider getting that second card.

(The writer is CEO, BankBazaar.com)

Get live stock quotes from BSE, NSE, US market and latest NAV, mutual fund portfolio, see the latest underwriting news, best IPOs, calculate tax by income tax calculator, see top market gainers, biggest losers and best stock funds. like us Facebook social networking site and follow us Twitter.

Financial Express is now available on Telegram. Click here to join our channel And stay up-to-date with the latest Biz news and updates.

Source link

By admin

Leave a Reply

Your email address will not be published.