Four questions to ask before saying yes to multiple credit cards

5 MinsJuly 14, 2021

Saurabh Chakravarty has three credit cards that he uses. He has never defaulted on any payment and always clears his bills in full before the due date. Given his stellar track record, it is not surprising that he constantly receives calls from banks offering more credit cards. Saurabh is tempted to apply for more. But he is not sure if he should. Are four or five credit cards too many to handle? What if he continues with his practice of paying off his dues in full on time?

multiple credit cards


Answering the following questions can help Saurabh decide on the ideal number of credit cards he should have.

What is the credit limit on your credit cards?

When banks offer you a credit card, one of the parameters they consider while fixing the credit limit is your income. As years go by, your income will go up. However, card companies sometimes refuse to increase credit limits despite a rise in your income and despite regular repayment on your card. If this is the case, it makes sense for you to get another credit card with a higher credit limit.

Are you utilising more than 30% of your credit limit regularly?

Credit utilization rate is the amount of credit one avails of compared to the total credit card limit. It is recommended that the credit card utilization rate should not exceed 30% of your credit card limit. For example, if you have a limit of Rs 1,00,000 on your card and your regular spending is around Rs 70,000, then your credit utilization rate is 70%. This may drag down your credit score, which is not desirable. If that is the case, then it makes sense for you to get another credit card to spread your credit utilization better. By spending across more than one card, you can keep your credit utilization rate low for all the cards.

Do the new credit cards offer better rewards and points?

Sometimes, new credit cards offer great incentives. Let's assume the new credit card might offer you up to 4% cash back on fuel. For instance, the Indian Oil Axis Bank Credit Card offers 4% value back on spends at IOCL pumps. A feature like this could be useful if, say, you are planning to use your car to commute to work regularly. Even if your fuel expenses go up, you can earn cashback or reward points on your card.

Are you anticipating huge expenses in future?

If you are anticipating huge expenses in future, then you may want a credit card to pay for them. But while it could be useful in case of an emergency, you must keep track of your expenses and not get caught in a debt trap.

[Also Read: Checklist To Look At When You Choose Your Credit Card]

Disadvantages of having too many credit cards:

  • It's very easy to get caught in a debt trap. Cardholders might be tempted to use them carelessly. Also, spending too much will bring down the credit utilization ratio and in turn affect your credit score negatively.
  • Multiple cards mean having to keep track of multiple due dates. And if by chance, you forget to pay your dues on time, it will affect your credit score.
  • Hidden charges have a way of sneaking up on new credit cards. These could be annual fees, late payment fees, etc. Make sure you understand all the points before you agree to a new card.
  • If lenders see that a customer has applied for multiple cards, they may perceive the customer as credit hungry. They may refuse to sanction big-ticket loans like home loans and auto loans in the future.

After answering all these questions, Saurabh realised that no matter how many credit cards he holds, the key is to manage them well by keeping the utilization rate low and paying off all bills on time. He plans to use the card with the best offers and highest cashback for his regular expenses and keep the others for emergency spending or high-ticket expenses. This way he can enjoy the benefits and not be overwhelmed by the payment schedules. A wise decision indeed!

Axis Bank offers a range of credit cards with various benefits tailored to its customers' preferences. Customers are also entitled to Edge Reward points depending on their spending patterns. You can redeem them for a range of attractive deals and offers. To know more about Axis Bank Credit Cards, click here.

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