Alternate between credit cards smartly

Credit cards have become a great tool of spending flexibility and rewards for customers, especially if they have multiple cards in their wallet. Multiple cards provide the cardholder access to a higher credit limit and enables access to more card-related perks and benefits, which may be in the form of cashbacks and rewards.

Using two to three credit cards at the same time helps in maintaining a low credit utilisation ratio on each card, which is viewed positively by most lenders. Further, having multiple credit cards also helps in building your credit history and a good credit score through timely payments. But multiple cards can be rewarding, only if used cautiously and judiciously.

While there are multiple advantages of carrying more than one credit card, it would also require keeping a track of each billing cycle, credit limit, and payment due date. This can turn out to be overwhelming and can adversely impact a card holder's credit score, even if a single payment gets missed. Moreover, having access to more credit can also tempt the user to overspend, which will just add to the unnecessary debt burden. Multiple cards come with their own set of pros and cons. The fundamental principle is to own the right number of cards based on your requirements and to exercise strong financial discipline.

Some tips to leverage the maximum benefit from holding multiple cards are as explained below:

There's no harm in having several credit cards. If you use two or three credit cards wisely, it enhances your credit profile. The catch, however, is to not use the entire available credit limit but restrict your spend to only about 30% of your credit limit from each card. This shows that you're not overly dependent on credit and improves your chances of getting loans in the future at favorable terms.

Every credit card comes with its own set of rewards, deals, and discounts and most credit card companies give the user an option of choosing which segments (such as fuel, dining out, travel, etc.) they want maximum rewards for. There are certain cards that have higher rewards for certain kind of purchases and services. Some even offer free benefits such as unlimited golf games and free airport lounge access. So choose your cards and rewards wisely in order to get maximum mileage out of them. Some cards with lower rate of interest can be attractive, if one intends to avail credit on cards and not just use them for spending purposes

Once you have selected the cards, you also need to be smart in choosing the right card for every transaction. For instance, a card meant to give huge points and cashbacks should be used for shopping, the one with high credit limit can be used for large value purchases and one with low interest rate can be used to avail credit on your card. Careful usage of the cards based on their features allows you to maximise the benefits from your cards.

If you have different credit cards, you can stagger the repayment for your purchases smartly. For instance, if you know you are a little short of funds in a particular month, you can make a necessary purchase on a card whose billing cycle has just begun. This will allow you to make the payment for that purchase in the next month when you might have more liquidity.

Once you decide to keep multiple cards, financial discipline becomes extremely important as even a small oversight or delay in payment can reduce your credit score. Keep a track of your spending, credit billing cycles and payment dates. Set reminders to make your credit card payments on time and always, pay attention to any messages from your bank related to changes in the features and fee structure of your credit card.

IS MORE BETTER

• Having multiple credit cards helps in building credit history and good credit score through timely payments
   
• Having access to more credit can also tempt users to overspend, which will add to the debt burden 

The writer is co-founder and CEO, MyLoanCare.in