A credit card can prove to be really beneficial and useful tool if used responsibly. The security features that credit cards are decked with nowadays make them much more secure then carrying regular cash. Once you get a credit card and start making good use of it, the next question is whether you should get an additional credit card. Your spending habits might have changed with time or some attractive benefits and rewards might have caught your eye. You may also get an additional credit card for improving your credit utilization ratio and building your CIBIL Score. Whatever be your reason, here we will talk about different aspects of owning multiple credit cards so that you can make a wise decision on whether or not to apply for a new credit card.
The Upsides and Downsides of Getting Additional Credit Cards
The Upsides
Following are the benefits of getting an additional credit card:
- Financial Security
Having multiple credit cards can prove to be really beneficial in an emergency. It does not matter if it is a medical emergency or if you are strapped for cash in a foreign land. Knowing that you have your credit card to lessen the financial burden can be really helpful.
- Rewards and Benefits
Having multiple credit cards will let you make the most of the rewards or benefits offered by the various credit card providers. Usually people’s first credit card comes with no frills. So the additional credit card will allow the user to make full use of the rewards and benefits they want to have.
- Security
Having multiple credit cards can be really beneficial from a security point of view. For example, you can get a credit card for online spends, this way you do not expose your other credit cards to online frauds.
- A higher credit limit
An additional credit card gives you extra credit limit, usually higher than your previous card. A higher credit limit means that you can now make bigger purchases and are able to spread your expenses over different credit cards. By not increasing your credit utilization ratio, you can also lessen the impact on your credit score.
The Downsides
There are a few drawbacks that one must remember when applying for multiple credit cards these are:
- Remembering the due dates
Owning multiple credit cards can prove to be quite a hassle especially if you have to remember the multiple due dates of the credit cards. A missed due date can result in late payment fee along with interest that will be charged on the outstanding amount.
- Impact on credit score
If you are planning to apply for a credit card do remember that every credit card application you fill and submit will affect your credit score negatively. Filling out too many applications at once makes you seem credit hungry all of a sudden. This will lower your credit score and if in the near future you attempt to get a loan the chances of that getting approved will also be lowered.
- Chances of Debt Spiral
If you can make credit card work for you then multiple credit cards would greatly help you in accruing reward points and benefits. However, if you let the credit cards take charge over you then they can pull you down in a negative spiral which will lead to a ruined credit score..
Reasons to Get a New Credit Card
We have established that if credit cards are not responsibly managed then the consequences can be disastrous. However at the same time, they can be beneficial. Here we discuss some reasons why you must consider getting an additional card.
- To have a credit card of you own
You might be using add on card that is linked to your spouse or parent’s credit card. Though you might be able to enjoy the benefits of a credit card, you are not developing your own personal credit score or history. If you are salaried or self-employed you should definitely seek a credit card of your own. This way you will develop your own credit score and history and in the future be able to apply for a loan.
Suggested Card – HDFC MoneyBack Credit Card
HDFC MoneyBack credit card is a great card for those who are new to credit. The card comes with good credit limit and lots of benefits and rewards. Users get 2 Reward Points for every ₹ 150 spent and 4 Reward points on online spends. Customers will be able to redeem reward points as cash credit (100 Reward Points = ₹ 20). Customers will also get accidental death insurance up to ₹ 50.00 Lakh and fire and burglary protection for goods above ₹ 5,000 for 180 days, as long as customers make four transactions every month.
- To Explore More Options
When you applied for a credit card without any credit history, only a handful of options would have been available to you. But having a good credit history opens a path for exploring more options. Now that you have developed a good credit history you can apply for other credit cards that much better serve your needs and spending patterns.
Suggested Card- IndusInd Bank Platinum Aura Credit Card
Platinum Aura Credit Card is designed for individuals who expect luxury and enjoyment in their life. As a welcome gift Platinum Aura credit card users get Eazy Diner gift vouchers, MakeMyTrip gift card, Satya Paul vouchers, and 100% discount on base fare of Jet airways tickets. Users earn 0.5 savings points per ₹ 100 for regular spends and accelerated rewards can go as high as 4 saving points per ₹ 100 spent in departmental stores. 1 saving point equals ₹ 0.50 or 0.5 airline mile. Cardholders can redeem these points to purchase merchandise from the bank’s rewards catalogue. They can also redeem them for airline miles, Oberoi Hotels Loyalty points or for paying their credit card bills.
- To Get Extra Rewards and Benefits
The first credit cards that people usually get do not offer as much rewards and benefits as the premium credit cards can. The premium credit cards are usually extended to those that have a good credit history, good credit score and a good salary. Rewards can include air miles and reward points that can be exchanged for plane tickets or items respectively. A reward program that is better aligned with your purchase habits will prove to be beneficial in the long run.
Citibank Rewards Credit Card is specially designed for those who want to earn rewards on their transactions. Welcome benefits include a chance to earn up to 2,500 reward points. Users can also earn additional 300 bonus points per month if their monthly spends exceed ₹ 30,000. 1 Reward points is accrued for every ₹ 125 spent. 10 reward points are offered on apparel and departmental purchases.
- To Improve your Credit Score
People usually start with a basic credit card or a secured credit card. If you had a bad credit score and got a secured credit card, then you should consider moving on to a new unsecured credit card. With an improved credit score, you are now eligible for many options now and with a bit of research you will be able to get one that best matches your spending habits and helps improve your credit score.
Suggested Credit Card – Standard Chartered Platinum Rewards Card
Standard Chartered Platinum Rewards Card is a great credit card that gives its users 1 reward point per ₹ 150 spent on all expenses and 5 reward points per ₹ 150 spent on dinning and fuel. Users also get to join the Standard Chartered Good Life Program through which they can enjoy a host of discounts and offers on dining, shopping and travel. The rewards points can be redeemed on Standard Chartered 360° rewards program or on air miles, or as cash back to pay the outstanding amount on your credit card bill.
- To avail a lower interest rate
The credit card you currently have might be charging you a higher rate of interest. There are few credit cards that charge less on the revolving credit which might not seem much to those that pay their dues on time but if in the future, because of an emergency, you have to make huge transaction then the higher interest rate will greatly affect your savings. This is especially true for those who make minimum payments on their credit card bills. Moreover, if you move on to a credit card that charges lower interest rate, you can transfer the balance from your previous credit card to the new card and save on the total interest payout.
Suggested Credit Cards – YES First Preferred Credit Card
Yes First Preferred Credit Card charges very low interest rates 1.99% per month (23.88% annually) for those that have a YES Bank salary/savings account; otherwise it is 2.75% per month (33.00% annually). Customers also get 15,000 reward points and Priority Pass membership, and 25% discount on movie bookings through BookMyShow as a welcome gift. Users are also rewarded with 8 reward points on every ₹ 100 retail spends. 1,000 Bonus points are also rewarded for each utility bill registered with YES PayNow.
- To accommodate your changing spending patterns
As time passes, people’s interest or spending patterns change. When you applied for a credit card you sought one that would reward you with movie tickets or discounts for movie tickets and as time passed your work called on you to travel a lot or you became a traveller looking for new experiences. Now it would be wise to adapt to a credit card that can help you in maximizing your savings by accumulating rewards on your new spends. Credit cards that offer miles and hotel loyalty program points can be very beneficial in this scenario.
If you are looking for a credit card that you can use to meet your travel needs, then American Express Platinum Travel will be a great choice. The credit card rewards its users with travel vouchers, Taj Experience Gift Cards, Airport Lounge access, and savings on travel bookings with MakeMyTrip.com. Users also earn 1 Membership Reward Point for every ₹ 50 spent.
- To get a credit limit increase
A higher credit limit can be really beneficial to credit card users even if they do not plan to spend as much as their credit limit. Credit Utilization ratio is one of the factors that affects your credit score. It is calculated by dividing your outstanding balance from your available credit card limit. A lower credit utilization ratio shows that you manage your credit well and hence are less likely to default on your payments whereas higher credit utilization ratio shows you are credit hungry which means increased risk of defaulting on payments and this jeopardizes your credit score. Ideally you should not spend more than 30% of your credit limit. So with multiple credit cards your overall credit limit will increase and you can spread your purchases over the different credit cards and not impact your credit score.
Suggested Card – HDFC Bank Diners ClubMiles Credit Card
If you are looking forward to getting a higher credit limit, HDFC Bank Diners ClubMiles is a good option. Users of this credit card enjoy many benefits as well. Every ₹ 150 spent gets 4 Reward points. The card offers best miles exchange program 1 air mile for every reward point. The air miles can be used with leading airlines and hotels both domestic and International. The airlines are British Airways, Jet Airways, Kris Flyer, Trident Hotels, and Club Vistara.
- To avoid paying an annual fee
If your credit card charges an annual fee and does not give you much rewards and benefits on using it you should definitely seek another credit card. Switch to a card that does not charge an annual fee or at the very least waives it off if you reach a spending milestone.
Suggested Credit Card – HSBC VISA Platinum Credit Card
This credit card does not charge an annual or renewal fee. Welcome benefits include ₹ 2000 clear trip voucher. 10% cash back up to ₹ 2,500 for making minimum 9 transactions totaling to ₹ 10,000 or more in first 90 days of card issuance. Accelerated reward points accumulation for first 12 months of card issuance on expenditures made in dining, hotel or telecom categories. Users accrue 2 Reward points per ₹ 150 spent and 5 Reward points on purchases made after having spent ₹ 4.00 Lakh. Users can redeem the points through the rewards catalogue or get them converted to airline miles for Jet Airways or Singapore Airlines.
- Your current credit card is going to be discontinued
The credit card you currently have might have proved to be really beneficial to you over the years but one day you were thrown in chaos when an email or SMS came to you telling you that your credit card will no longer be supported by the bank. This can prove to be a blessing in disguise as many credit card providers come up with many new credit cards with attractive benefits and rewards. So investing in a new credit card could prove to be more beneficial in the long run perhaps more than the original credit card.
Decisive Question about Additional Credit Cards
Should you apply for additional credit cards?
We have covered all the pros and cons that are associated with owning multiple credit cards. Now it is up to you to decide whether or not you should apply for a new credit card. If your old credit card does not serve your needs as well as a new one might, then go for it. If you aim to collect credit cards then we would strongly recommend that you reconsider your decision. Credit cards are serious business mishandling which could greatly affect you in the long run.
If you have not been serious up till now about credit card or your finances we recommend you sit down and jot down all the pros and cons that are associated with getting a new credit card. If the pros outweigh the cons. Then go for the new credit card and reap the benefits.
Should you close an old credit card?
Now that you are ready to get a new better credit card you might want to close the older credit card account. We strongly recommend you to reconsider that line of thought by continuing to read this section.
The old credit card, which might be charging an annual fee, has a much longer history and credit history greatly impacts your credit score. In the future, if you plan on getting a loan, the bank will check your full credit history. This might prove to be a detriment if the bank feels you do not have sufficient credit history and on that ground reject your loan application. So a long credit history will only be a benefit to you. We suggest you make a minimum of purchases on the old credit card and pay your bills timely.
What is the ideal number of credit cards?
A question that many credit card users come up with is the number of credit cards that one should have. The answer varies from person to person. An individual who travels to foreign nation for business or for pleasure would want to have a credit card that serves them domestically and internationally. On the other hand, someone who only needs credit card for building credit score can do so with only one card. As we see people have different needs and spending habits so the answer depends on the financial status of the individual and their spending habits. Multiple credit cards will greatly benefit you in maintaining a lower credit utilization ratio.
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