Multiple Credit Cards? All you need to know

Jul 2018 | Team Rubique

Do you have more than one credit card? Are you worried that it might affect your credit score?

Although credit cards are an amazing option for people who can maintain it, there is still a lot of confusion around this topic. Some people apply for multiple credit cards because someone they know talks highly of it. Others buy it without comparing credit cards available in India and then regret not having a better card. Then, there are also people who don’t really need another credit card but apply just for the sake of it.

Honestly, when it is about finances, everyone has their own needs and you should consider it before checking credit card offers. Some people may genuinely require more than one card and they can handle it too. Others can go on without having one. So, it is all about your finances and how much credit you can manage in a month.

Should You Get Another Credit Card?

Before considering any other factor, one important thing to know is, do you really need another card? Everything else including the drawbacks and difficulties of having multiples credit cards come after this. Hence, analyze these questions to evaluate if you need another credit card:

  1. What are the advantages this credit card is offering and do you actually need these benefits?
  2. Are you in a position to acquire another credit card and also manage the entire credit at the end of the month?
  3. How much credit have you already taken or what is the amount of your unsecured debt?

Answering these questions positively is a sign that you can manage multiple cards. However, if you answer even one of these questions negatively, it is time to push yourself to drop the plan.

The Facts about Using Multiple Credit Cards

Let’s say you have multiple credit cards. What is the right way to use all these credit cards in a manner that it doesn’t affect your credit score negatively? Here’s how you can do it.a

1. The Why

Always consider the why before applying. Analyse your needs for a second credit card, and even if you do need it, can you really manage it without sabotaging your credit score? We are stressing on this point because it is not advisable to not use a card after availing it or taking a second credit card for the short term. COO of CIBIL, Harshala Chandorkar, believes that if you have applied for a credit card, then you must use it for at least next 12 months. Frequently closing your credit card can severely impact your credit score.

2. Payment History

If you think about it, then payment history is one of the most important factors in forming your credit score. It does not matter whether you have two or three or four cards if you are paying the bills on time. This is something that matters the most, and what is the point of using a credit card if you are unable to pay thae bill on time.

3. Keep a Track

Other than payment history, it is essential to keep track of all your cards. Many people apply for various credit cards so that they won’t have to clear all the bills immediately. But, what about the credit card bills? Not paying credit card bills on time again hurts your credit score. Apart from this, it is also necessary to access all your credit cards regularly. If you can’t handle the burden, then having multiple cards is a risk.

4. Choose Wisely

When you are checking your credit card eligibility or applying for credit card application online, only apply for cards feasible or relevant to you. There are many cards that offer discounts for grocery stores or other cards provide free airport lounge access. If you can utilize these services, then go for these cards and shop from these cards at relevant places.

How Can Multiple Credit Cards Affect Your Credit Score?

Your credit score is a factor that helps lenders evaluate your ability to manage and repay the credit on time. When you apply for new credit cards, loans, or credits, this credit score is visited to determine if you are capable enough to repay the credit.

Maintaining a good credit card history is necessary no matter how many cards you have. If you are punctual with the payments, renewal cycle, and borrowing, everything will run smoothly. However, more credit cards obviously leave scope for forgetting payment date or inactivity of some cards.

Moreover, credit cards that have long inactivity raise many eyebrows. Let’s understand this clearly – every credit card is assessed based on its utilization ratio. If one or more of your credit cards has not been used for a long duration, this card may be considered inactive. The lender can shut down the service without informing you. This will directly decrease the credit in your name, which will impact your credit score.

Another way in which card inactivity affects one is when during most of your credit history duration, your card was inactive. Once the lender closes this card, your credit history benefits will be lost and your credit score will get affected.

How Can Hard Inquiries Affect Your Credit Score?

Whenever you apply for a new credit in any form including loan and credit cards, a hard inquiry is done on your CIBIL score. If you have applied for multiple credit cards quickly, this will affect your credit score badly. You may be perceived as a credit hungry person, and multiple applications will indicate that you are about to suffer high credit burden in the future. This is not something a lender would want, and a person with so many inquires doesn’t make the perfect candidate for a new card.

Do You Really Need That Extra Credit Card? Make a Rational Decision

If you don’t need that extra card, there’s no point of applying for one. There is a simple choice here – don’t purchase an extra credit card if you can’t handle it or if you do apply, then manage it and pay all your bills on time. One wrong move can wreck your credit score, and if you are not careful in making timely payments, it can severely harm your credit history. If you have even the slightest of worry about repaying all this piling credit, then it is best to not have multiple credit cards.