What is the maximum number of credit cards you should have?
The benefits and drawbacks of owning several credit cards are numerous. As difficult as it may be to manage many credit cards, if utilized wisely, having more than one card can really be a benefit. Because each credit card offers a unique set of perks and features, it’s not uncommon for people to apply for a slew of them. For example, in case of a travel credit card, the maximum benefits may only be accrued if the card is used for travel-related purchases. It’s for this reason why so many individuals use a variety of credit cards.
Increase your credit score by getting a new card
The usage ratio, or the amount of money spent out of your entire credit limit, can be increased by availing another credit card from a different bank. As most experts suggest, “the smaller your debt-to-credit limit ratio, the better is your financial position.”
Maintaining a utilization ratio under 30% is generally recommended. Adding up all of your monthly expenses (the balances on all of your cards) and dividing that number by the total of your credit limit will reveal this information. If you had a Rs.1 lac credit limit and a Rs 20,000 balance, your usage ratio would be 20%. You may reduce your credit utilization ratio by acquiring a new credit card, as long as your expenditure remains the same.
In terms of credit card accounts, how many accounts are too many?
There is no penalty for having too many credit cards, but there is a price to pay for not having one according to credit rating systems. CIBIL recommends an ideal scenario of two or more credit facilities, which can be a combination of credit cards and loans.
As a result, it might be difficult for scoring algorithms to give you an accurate score. A “thin file” is a collection of four or fewer accounts. Thin files are more difficult to score high on, and lenders may perceive them as more risky. Your credit activities might have a greater impact on your score when you have a thin file than when you have a thick file. As an illustration, if you just have a single credit card, it won’t take much spending to exhaust your total credit limit. Credit utilization is the percentage of your available credit that you utilize, and those with the greatest scores tend to use less than 10% of their available credit. You may be able to lower your credit usage by using more credit cards. In contrast, if you have too many credit cards and fail to make a payment, this might have a negative impact on your credit score. Avoid missing deadlines by keeping an eye on the calendar to pay your EMIs on time.
It doesn’t matter how many credit cards one has to cover their expenses. There are a number of factors to keep in mind while choosing the right credit card for you (which can change over your lifetime).
Make sure you don’t have too many cards so that you can’t keep track of the payment due dates. In order to get points or cash back on your monthly spending, it’s a good idea to have more than one credit card, ideally 3 or more. Maintain a low credit utility rate at all times in order to raise your credit score.
