Multiple Credit Cards: What are the benefits and drawbacks?

You walk into a fashion boutique and see an outfit on sale that appeals to you. You pick it up and hand over your debit card at the payment counter, only to be told by the cashier that your bank balance is inadequate.

Of course, you can drop your purchase plan and wait for the next month to receive your salary. But what if the product you’ve selected goes out of stock by then? What would you do in such a situation? 

This is where a credit card can help. It allows you to borrow money from a fixed credit line and make payments on the go. You can use your credit card to shop and pay at merchant outlets, make online payments, and withdraw cash from an ATM. It works just like a debit card, but the money isn’t deducted from your bank account instantly.

What’s more, you can gain reward points and enjoy up to 48 days of interest-free credit with your credit card. 

Can you have more than one credit card?

You can apply for a credit card with a bank or a non-banking financial company (NBFC) that offers this facility. The question is, can you apply for more than one credit card?

The short answer is: yes, you can. Although you might not be able to have two credit cards from the same bank, you can apply for multiple credit cards from different banks. No law in India prohibits an individual from having two or more credit cards. 

Is it beneficial to have multiple credit cards?

On the face of it, having two or more credit cards seems like a good idea as it usually gives you a higher credit limit, offers greater flexibility, and lets you earn more reward points. 

However, managing different credit cards can be an arduous task. And if you don’t use your credit cards smartly, you may fall into a debt trap. So, to evaluate whether having multiple credit cards is good or bad in India, you must know these pros and cons.

Advantages of having multiple credit cards

• Become eligible for a higher credit limit

As we saw, a credit card allows you to withdraw an amount up to a pre-determined credit limit. For example, if the credit limit on your credit card is Rs 50,000, it means you can use it to borrow up to Rs 50,000 for various purposes.

However, having multiple credit cards gives you access to a higher credit limit. For example, if you have three credit cards with credit limits of Rs 50,000, Rs 60,000, and Rs 40,000, your total credit limit will be Rs 1.5 lakh.

• Enjoy a longer interest-free period

The interest-free period you get on your credit card depends on its billing cycle. If your card’s billing cycle ends on the last date of every month, you can enjoy an interest-free period on payment made on (say) the 18th of the month for 30 days. Similarly, if you make a payment on the last day of a month, you can enjoy only 18 days interest-free period on it.

However, if you have multiple credit cards with different billing cycles, you can juggle your payments between them to enjoy a maximum interest-free period. For instance, if you have a second card whose billing cycle ends on the 15th of every month, you can use your first card for shopping till the 15th of every month and then use your second card from the 15th to the 30th.

• Get more reward points and offers

You can earn reward points and cashback by shopping or paying using your credit cards. You also get credit card offers on movie tickets, grocery purchases, travel tickets, etc. By having multiple credit cards, you can get more reward points and additional offers. For example, if you want to watch a movie, you can use a credit card that offers maximum discounts on movie tickets. To note, IDFC FIRST Bank gives a 'Buy one, get one' offer on movie tickets up to ₹250 on Paytm mobile app, valid twice per month.

Or, if you are planning to book a trip, you can use a travel credit card that offers attractive discounts on flight tickets and hotel accommodations.

• Give your credit score a boost

Having multiple credit cards can also help your credit score. Your credit utilisation ratio plays a significant role in determining your credit score. You get a greater credit limit when you have multiple credit cards, and your credit utilisation ratio stays low even after extensive use.

For example, suppose you have a total credit limit of Rs 2 lakh across three credit cards. You face an unexpected expense and use Rs 1 lakh from your credit limit. Even in this scenario, your credit utilisation ratio will remain at 50%, and your credit score won’t get hampered.

Disadvantages of having multiple credit cards

• They can be difficult to manage

Credit cards have different payment cycles and can become challenging to manage. Keeping track of all credit card due dates and payments can be quite a task. If you miss any credit card payment date, you will start incurring interest at a high rate.

• There is an increased debt risk

While having multiple credit cards provides you access to a greater credit limit, it also increases your debt risk. You may end up spending more than you should. If you don’t use your credit cards wisely, you may even fall into a debt trap.

• Your credit score may fall

We saw that having multiple credit cards can help your credit score. But on the flip side, when you apply for a new credit card with a bank or NBFC, it conducts a soft inquiry on your credit score. And each time such an inquiry is made, your credit score drops temporarily.

Conclusion

There are many benefits of having multiple credit cards. It can be a good idea if you can use all your credit cards smartly. So, knowing how to use a credit card wisely is crucial. With IDFC FIRST Bank, you can get a lifetime free credit card and earn up to 10x reward points on every purchase. Click here for more details!

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.