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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
22 NOVEMBER, 2021
What are the benefits of owning multiple credit cards?
In today's world, you can make transactions with digital and cashless payments. A credit card provides you with many benefits as well as some disadvantages. However, almost everyone has at least one credit card in their wallet. But as per the financial experts, you can have more than one credit card. If you have several credit cards, you can get additional benefits.
Some of the benefits of having multiple credit cards are:
1. Increased Credit Limit
When you purchase a credit card, you are provided with a certain credit limit. You are allowed to make purchases within that limit. For example, you purchase a credit card with a credit limit of Rs. 1,00,000. You can purchase up to Rs. 1,00,000 only using this credit card. However, it is not ideal to use the entire credit limit of your credit card. Therefore, if you think that your expenses are higher, you can purchase another credit card. The other credit card is going to give you an additional credit limit. For example, if the second credit card has a limit of Rs. 80,000, you can now make purchases up to Rs. 1,80,000. Therefore, having multiple credit cards provides you with an increased credit limit.
2. High Credit Score
Your credit score demonstrates your creditworthiness. You need to have a good score of credit if you apply for any loan. Your credit score depends on your usage and payment of your credit cards. If you have multiple credit cards and make your payments on time, you can maintain a good credit score. When you make purchases with a single credit card, you need to make the entire payment in one go. However, when you make payments with different cards, you have to pay the amounts on different dates. It gives you the advantage of making full payments on time. Also, you do not make all your purchases from a single card which reduces the usage of a single card. Hence, low usage and timely payments contribute to a higher credit score.
With multiple credit cards, you get to have financial flexibility. You can make purchases from different cards having different due dates. This way you do not have to pay one single amount on a single date. If you manage your purchase, you can manage your payments easily with multiple cards.
4. Rewards You must use your credit cards wisely and only up to a limit that you can easily pay back in
To make credit cards even more rewarding for you, banks offers reward points to its customers. For example, some credit cards might be giving cashback on utility bills. While another credit card might be providing discounts on dining. When you have multiple cards, you can benefit from different rewards that come with them. You can use different cards for different purposes depending on their rewards. It again would provide you with payment flexibility.
5. Additional Security
More than one credit card, it provides you with financial security. If one of your cards gets blocked or compromised, you can use the other card to make payments. Sometimes a card does not work on a certain credit card machine or may get blocked due to suspicion of fraudulent activity. In such cases, it is always an advantage to have additional credit cards.
6. Low Credit Utilization Ratio
A Credit Utilization Ratio denotes the percentage of the amount you spend from your credit card limit. The ideal CUR is 30%. For example, if your credit card has a limit of Rs 1,00,000, you must spend up to Rs 30,000 to maintain your CUR. It may be difficult to manage your purchases while maintaining your CUR with a single card. However, when you have multiple credit cards, it becomes easier to maintain your CUR. You can use the limit from the other card while maintaining the CUR on all your cards.
Most people keep 3-4 credit cards for their expenses. However, it is important to use and manage them efficiently. If you exhaust the credit limit of all your cards, you may face difficulty in making payments later. Also, you would not have any financial security in case of an unexpected expense. You need to take advantage of having multiple credit cards and not make them a liability for yourself. You should make payments with a credit card only where it provides you with additional benefits. Also, you should keep liquid funds available for emergencies and avoid using a credit card. A credit card provides you with credit today but you only have to make payments in the future. You must use your credit cards wisely and only up to a limit that you can easily pay back in the future. Credit cards would always provide you with both advantages and disadvantages. But it is up to you how you manage them for yourself.
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