An average person today owns at least two cards. But there is no magic number as to how many cards should you own to improve your credit score. Some people like to have more cards to increase their shopping limit, while some take it to earn rewards. Whatever is your reason, one thing is for sure that credit cards can impact your credit score in both, positive and negative manner. So, the question here should be, how many credit cards should you have to earn a good credit score?
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Benefits of credit cards
The instant availability of credit is what that makes credit cards so beneficial, especially when you are out of cash. Credit cards give you the liberty to spend now and pay later even if you don’t have any money left in your bank accounts. Many studies have revealed that the maximum amount of cards is used during the last two weeks as most of the people are low on account balances during that time. Credit cards are highly beneficial, but only if used them properly. Any kind of negligence leads to financial troubles. Therefore, it is important to learn both the sides first and then make your decision.
Benefits of several cards
Credit cards and credit scores go hand in hand. Credit companies will issue a card only if your credit rating is good. Your credit ratings talk about your credit health, your liabilities and how you have been managing your credits. These companies also scan your bank accounts to check your cash flow trend. In case you have enough surplus in your account, companies will run after you to offer credit cards. Owning a credit card brings a lot of benefits to the table:-
- Build credit score – This is by far the biggest advantage enjoyed by users owning multiple cards. As a user, if you own multiple cards and even make timely payments on all your cards, it will help in building your credit score. This further helps in gaining more credit opportunities in future like loans or more credit cards.
- Low credit utilization ratio – The credit utilization ratio is calculated on the total amount of credit assigned to an individual. If you are able to keep your credit utilization ratio below 30% of your total limit then you are well maintaining your credit. Therefore, a higher number of cards will help in keeping the utilization ratio low.
- Rewards and cash backs – Most of the credit card companies provide reward points or cash backs on purchases. Customers can redeem these reward points and get discounts while shopping. Owning multiple cards increases the possibility of earning more reward points
- Getting a higher limit – if you own multiple cards and using them properly, then credit card companies can increase the credit limit gradually. Increased credit limit has its own advantages, few of them mentioned above.
Also read – Great Tips to Avoid Credit Card Over Spending
Armed with so many benefits, owning multiple credit cards is definitely a good option.
Disadvantages of multiple cards
- Too much confusion – With higher number cards are higher responsibilities of managing it. Users would have to be on top of every credit cards statement, would need to ensure that none of their cards is inactive for a long period of time, would have to keep the credit utilization ratio maintained etc. This can be very stressful for some. Therefore, only if you can keep up with all the responsibilities then apply for multiple cards, but if definitely depends on your eligibility.
- Possibilities of high debt – People who have multiple cards also have higher shopping limits. This can lead to overspending and put in huge amount of debt which can have a negative impact on credit ratings and even decrease the possibilities of loans or credit cards in the future.
- Negative impact on credit score – High amount of debt leads to delay in payments, which further leads to impacting your credit score. If a user is unable to clear all their dues timely, it will definitely damage the credit score. Bad credit scores make difficult for users to gain more financial help if needed in the future.
So, looking at the drawbacks, owning multiple cards can also be dangerous.
As mentioned earlier, there is no set limit on how many cards you can own. As long as you are eligible, you can have any number of credit cards. But remember that owning multiple cards has its own merits and demerits. It is all about how you manage your credit utilization ratio because it has a direct impact on your credit rating. As a beginner, you should start with one card and gradually increase the number according to your income and repayment capacity. Also, if you own multiple cards make sure that you use them properly and that also depends upon your lifestyle like you are a foodie and you have to spend a lot in groceries also than you can go for ICICI Credit card for food and SBI credit card for groceries and your purpose is solved .Users need to understand one thing that credit cards are only beneficial if you use them wisely.