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How many credit cards are too many?
Is a single credit card enough, or should one have more than one for optimal utility? The battle between the solo credit card argument and the poly credit card argument is complex. Each perspective has its advantages and disadvantages. In a nutshell, here they are:
Advantages of having multiple cards
- The only real reason to own multiple credit cards is to reduce the ‘debt utilisation ratio.’ This ratio depends on the credit limit of your card utilised. It gets higher the closer you get to entirely using up the card. Contrary to common sense, this negatively impacts your credit score. Mathematicians and economists have come up with the magic figure of ‘no more than 30%’ to have the best effect on your credit score. So instead of 90% off of one card, go with 30% off of two cards.
- With multiple cards, you can avail yourself of numerous rewards schemes.
- It increases your credit limit, depending on the number of credit cards you possess
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Disadvantages of having multiple cards
- Increased chance of falling into a debt trap
- Complexity in accounting
- Failure to miss a payment for even one card will very negatively affect your credit score.
Advantages of having a single credit card
- It centralises your expenditures
- It gives you more control over your money
- It has a far better impact on your long-term credit score
- It reduces chances of overspending
- Regular use results in increasing your credit limit, which will further reduce your debt utilisation ratio.
Disadvantages of having a single credit card
- In case of an emergency, there is no credit fallback.
- One must have strict control on expenditure to maintain a healthy debt utilisation ratio.
Though there are compelling arguments to be made for both, a single credit card seems to be the better choice for most of us. With regular use and diligent payment, one can increase their credit limit and thereby decrease their debt utilisation ratio.
Check out IDFC FIRST Bank’s FIRST Wealth card, and you will understand how it can be all the plastic you will ever need!
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.
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