Credit cards can be a great tool for boosting your credit score and increasing your spending power, but is there such a thing as having too many?
In this article, we'll dive into the pros and cons of having multiple credit cards and give you some guidance on how to find the right balance for your personal finance portfolio.
Officially, there is no cap on the number of credit cards you can have in India. You can apply for and own as many or as few credit cards as you want. This means you can have just 1 credit card or even ten cards, depending on your eligibility. That said, owning many cards has many distinct advantages and disadvantages. Check them out below.
Having multiple credit cards can benefit you in many ways. Here are the top upsides of owning several cards.
Multiple credit cards improve your spending capacity. Each card has a credit limit, but using only around 30% of your total credit limit is advisable. With a higher spending capacity, you can pay for big-ticket items more easily.
Having multiple credit cards and paying all the bills on time can improve your credit score. Since you have many cards, it is easier to distribute your expenses across them, keeping the credit utilisation ratio below 30% on each card.
Credit cards offer rewards, cashbacks, deals, and discounts. The more cards you have, the more rewards and offers you get to enjoy. Take advantage of these benefits to get better prices when you shop or book flight tickets.
There are also some downsides to having too many credit cards. Check them out below.
Having too many credit cards can quickly lead to a debt trap if you are not careful.
Having multiple credit cards means paying multiple fees like joining fee, annual fee, transaction charges, and more.
Having multiple credit cards can be both good and bad. It can increase your spending capacity and improve your credit score, but it can also lead to potential debt and higher charges. If you don't have any major liabilities, having two to three credit cards is usually a good idea. Just remember to always pay your bills on time and consider your financial goals before applying for more cards.
You don't need to have too many credit cards to take advantage of rewards-based credit cards. Consider the Fi-Federal co-branded credit card issued by Federal Bank. You can get 5% valueback by spending ₹4 lakh per year, which translates to around ₹35K per month. The rewards are worth more than ₹20K and are not limited to shopping or travel. You get rewarded for all your spends, and the rewards evolve dynamically according to your spending pattern. You can leverage the features and benefits to suit your specific requirements. The 5% valueback breakdown includes up to 2% valueback through rewards, 5x rewards on the top three brands that you spend the most on (from the Fi collection of 21 top brands), 2x on 21 major brands listed in the Fi Collection (such as Netflix, Amazon, Zomato, Uber, etc.), and 1x on everything else, including rent and fuel.
There is no upper limit on the number of credit cards you can have in India. Ideally, you can have any number of credit cards as your financial profile allows you to be eligible.
In India or elsewhere, having multiple credit cards is a double-edged sword. It can be a good thing as long as you use your credit cards prudently. On the plus side, credit cards help you improve your credit score when you pay your dues on time. And they increase your financial liquidity. But on the downside, if you are not careful, you may end up with a significant amount of credit card debt, which carries a high interest rate.
When it comes to how many credit cards you should have, there is no magic number. Having two to three credit cards is typically advisable if you do not have any other major liabilities in your portfolio. That said, you can have more or fewer credit cards as per what suits your specific financial persona and requirements.
Applying for too many credit cards at once can hurt your credit score. That said, having many credit cards in your portfolio does not adversely impact your credit score. Your credit score will only suffer if you have too many unused lines of credit or if you do not pay your credit card bills on time.