Do you have more than one credit card? Using multiple credit cards is not a bad idea. But you should know how to manage them in a systematic way, because a single mistake can lead you to pay penalties and high interest rate. Know these facts if you are using more than one credit card.
1.Decide why you need second credit card first: This is the most crucial part before applying for a second credit card. Make sure that you actually need second credit card and decide the use of it. If you can manage with single credit card, then no need to apply for the second one. Harshala Chandorkar, COO, CIBIL says- "Once you have availed a credit card, it is advisable to keep it for at least 12 months before closing it. The frequency of "opening" and "closing" a credit card account reflects on your credit report and credit score and impacts the lenders assessment of your credit management capacity."
It is always good to do a better research and then go for second card. Don't apply for second credit card for short period of time.
Mohan Jayaraman, Managing Director, Experian Credit Bureau, India says-''When an individual applies for multiple credit cards it points out a borrowers need to avail credit, indicating a growing credit appetite. Such individuals are perceived to be credit hungry, thus not viewed positively by banks and financial institutions. It is hence advisable that an individual avails of credit only to the extent it is required, to help maintain a better credit score. Should the need arise to have multiple credit cards an individual must ensure that he/she pays all outstanding dues on time''.
2.Pay all your credit card bills on time: When you are using more than one credit card, then make it sure you pay all your credit card bills on time. Delay while making payments can lead to risks, penalties and can lower your credit score as well. You also have to pay high rate of interest.
"Multiple cards mean multiple bills each month. If you hold more cards, you may lose a bill or forget to send a payment on time. Set a monthly reminder on your calendar or phone to login to your accounts and make payments."opines Chandorkar. So, to avoid yourself from high debt, be aware to pay credit card bills on time.
3. Multiple cards and credit score: The most important aspect of your credit score depends on being regular on payment of loan and credit card bills. If you are sincere in making payments timely, then definitely you score a good credit score and creditworthiness. Try to make the payments on or before due date to avoid penalties. Manage your multiple cards systematically.
"Having or applying for many credit cards will not hamper your chances of availing credit significantly if you have not defaulted or made settlements on any of these credit card dues."adds Chandorkar. To take loan, credit score plays vital role.
"Multiple credit card holders should also monitor their balance-to-limit ratio which is the total of one's balances divided by the complete limit on one's credit cards. Having more cards can increase one's total available limit, reducing the balance-to-limit ratio, which can positively affect credit scores."opines Jayaraman
4.Keep track of all your credit cards: Remember, it is very crucial to keep track of all your credit cards regularly. Check your due date, reward points and other things time to time related to all credit cards that you are using. A single mistake can cause risk and can affect your credit score as well. It is also advisable to access and review your credit cards regularly. People generally take multiple credit cards and avoid paying the bills on time. So, if you cannot track and manage them regularly, then please don't apply for two-three cards.
5.Select your cards smartly while purchasing: There are many credit cards which offers cashback, discounts from 1% to 3% on buying groceries, paying utility bills etc...Try to purchase and shop from those credit cards to avail the offers and redeem them. Use your second card for some important purchases and emergency use. Divide the use of your credit card on monthly basis. By using multiple credit cards, you can also make payments at different times throughout the month. This will definitely reduce some burden.
Last but not the least, whether you use one or two credit cards, it all depends on the way you spend and manage them. So, before managing your credit cards, try to manage your spending habits too.