Having multiple credit cards has its own set of advantages and disadvantages. While managing several credit cards can be quite a challenge for an individual, if used smartly, having more than one card can also be a boon. People are often tempted to apply for many credit cards because different credit cards come with different features and exclusive benefits.
Advantages of Having Multiple Credit Cards
Helps keep credit utilization ratio low: If you have one single card and use 90% of the credit limit, it will naturally bring down the credit utilization score. However, if you have more than one card and use just 50% of the credit limit, it will help maintain a good utilization ratio that is ideal.
Helps build credit score: Those who have several credit cards and still make all payments on time, will build a very good credit score. This will increase the credit worthiness of the individual and give him or her access to more credit opportunities.
Increases credit limit: Having many credit cards gives the cardholder access to a higher credit limit. However, this should be used responsibly.
More rewards and cashbacks: Multiple credit cards give customers access to more card-related perks and benefits, which may be in the form of cashbacks and rewards.
Disadvantages of Having Multiple Credit Cards
Difficult to manage: Having more than one card means keeping track of each billing cycle, credit limit and payment due date. This can get overwhelming and missing even a single payment due date can have an affect on credit scores.
Can lead to unnecessary debt: Having access to more credit can often be tempting. This can lead to overspending and this will inturn add to debt. If cardholders are not cautions enough it can easily lead to overspending.
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