Here is how you can decide the number of credit cards you should own
How many credit cards can you own? The answer depends on how you use your credit card. You can have as many as you want if you are a responsible user. Alternatively, if you are a reckless user, it is better not to have even one in your hands. You can use them only if you know how credit cards work. It can help you decide the number of credit cards you should own.
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Different cards for different uses
Not all credit cards are the same. Some cards come with an initial 0% APR, whereas some come with exciting cash-back or discount offers. Specific cards come with discounts when you use them for refueling your car. Some credit cards offer travel miles when used for booking air tickets. Check out what type of user you are.
The need for having multiple cards
A card that offers fuel discounts is not beneficial when you use it for online purchases. Similarly, a cash-back card serves a different purpose than when you book air tickets. Therefore, it makes sense to have specific cards for specific uses. The question again veers towards how you use the cards, especially concerning repayment.How should you use a credit card?
The golden rule in using credit cards wisely is to pay the bill in full every month. It is not advisable to carry forward balances to the subsequent months. Doing so entails that you lose the benefit of the interest-free period. Your dues start accumulating, and you could pay massive amounts as interest and risk affecting your credit rating.Factors that affect credit rating
Credit cards can affect your credit rating in various ways. Defaults in payments have a direct effect on your credit ratings. Making partial payments also affects credit rating because it increases the credit utilization ratio. However, having multiple cards is helpful, reducing the credit utilization ratio. The score also depends on the age of your accounts. Therefore, the older your credit card account, the better it is for your rating. Another factor that affects credit ratings is the number of hard inquiries on your account. Every card you apply for will result in the credit card issuer making a hard inquiry to determine your eligibility. It affects your rating, especially if the credit card application is denied. Having more credit cards benefits your score if you use your cards wisely.Benefits of having more number of cards
- Many cards offer valuable sign-up bonuses, some of which can be attractive.
- The more you use your credit cards, the more reward points you get on your purchases.
- If you travel frequently, have a couple of cards exclusively for booking air tickets and hotel accommodation. Redeem the travel miles when you book subsequent journey tickets. These cards also give you access to airport lounges.
- Have a separate card for refueling your car. Use the valuable fuel points to earn free fuel and save money in the bargain.
- A specific card for online shopping is ideal, as you can use it to accumulate cash-back and discount offers from online e-commerce retailers.
- Having a separate business credit card can help you to segregate personal expenses from your business dealings.
- Multiple cards are handy when you lose one or have specific issues with the card-issuing bank. You have an alternate payment method ready on hand.
- Having multiple cards also helps transfer balances from one card to another to benefit from a lower APR.
- Demerits of having multiple cards
- If you need to learn how credit cards work, it is not advisable to have multiple cards. You will end up piling up more debt than you can afford to repay. Take time to understand how credit cards work.
- Having multiple cards requires you to keep track of the payments regularly. You need to complete one payment to avoid getting in trouble.
- Multiple cards make it difficult for you to resist the temptation to purchase things that you do not need.
- Final thoughts
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