Most credit experts and financial advisors recommend, having more than three credit cards is generally not recommended. especially if you’re working on building or rebuilding your credit history.
How Many Credit Cards Should I Have?
Before moving on to our topic, how many credit cards should we have, let’s first understand: What is a credit card? How does it work? What is a credit score?
It will give us some sort of understanding. So let’s start.
What is a Credit Card?
A credit card is a financial tool issued by a bank or a company that offers financial services—basically a short-term loan—which allows you to make payments to merchants, for daily expenses or goods and services.
The bank or the company that issued the credit card makes that payment on your behalf, without you actually paying the money at that moment.
While issuing the credit card, banks give you a certain limit to spend based on your credit score. After the payment, you can pay that amount after your bill is generated or before.
You can pay the full amount or the minimum amount every month, or you can convert that amount into monthly EMIs.
Banks and financial institutions charge some fees or interest to provide these services.
So basically, a credit card is a tool that allows you to make payments by borrowing money from the issuing company.
Usually, a credit card looks like your debit card, but the services they offer are very different.
Credit cards also have an annual maintenance fee. It can be waived off if you spend a certain amount in a year, as mentioned while applying for the card.
Credit cards also offer some perks like movie tickets, discounts on hotel bookings, flight bookings, and many more.
It depends on which card you own and how you manage your expenses.
Using a credit card wisely can benefit you in ways you never imagined. Different cards are made for different purposes.
There is also an interest-free period in credit cards, usually 30 to 50 days, that allows the cardholder to pay back the spent amount without being charged any fees or interest before the due date.
But the amount you spend should be paid in full.
What is a Credit Score?
A credit score represents your credit behavior, such as how likely you are to repay your loan or whether you pay your EMIs on time.
Basically, it shows how creditworthy you are.
Based on this score, banks decide whether to give you a loan or credit card, what interest rate to charge, and how much credit limit to offer.
Usually, the range of credit scores is between 300 to 900.
The higher your score, the higher your chances of getting loans and credit cards.
Credit scores are categorized as follows:
Poor: 300–579
Excellent: 800–850
Very Good: 740–799
Good: 670–739
Fair: 580–669
How to Improve Your Credit Score?
Credit score plays a very crucial role when applying for any form of credit.
We should always manage our finances wisely and keep our credit score as high as possible.
You can improve your credit score by paying bills on time.
You should not spend the total credit limit—spending only 10% to 30% of your total credit limit will improve your credit utilization ratio.
Regularly check your credit score, and correct any errors or outstanding dues.
Do not spend more than your income.
If you have any past loans and they are not showing as closed, instead of paying all the amount again, kindly visit the issuing bank or company or contact the credit bureau and ensure it is updated as closed.
Also, do not apply for multiple loans and credit cards at the same time, because this creates multiple inquiries on your credit report, which can negatively affect your score.
How Many Credit Cards Should I Have?
Now that we know what a credit card is, how it works, and what a credit score is, let’s move on to our main topic—How many credit cards should I have?
We’ll understand better with an example:
Let’s assume that Yashraj earns ₹1 lakh per month and has a monthly home loan EMI of ₹30,000.
He travels by car and spends ₹10,000 per month on fuel, orders food through Zomato averaging ₹5,000 per month, and spends ₹10,000 every month on Amazon for clothes and home essentials.
- Let’s say he has three credit cards for different purposes:
He has an Amazon credit card that gives him ₹1,000 cashback on ₹10,000 spending.
He has a fuel credit card—issued by company XYZ in collaboration with a fuel company—that gives him ₹500 free petrol every month on ₹10,000 spent.
He has a Zomato credit card, which gives him 15% discount on every food order.
So now, you can understand how Yashraj uses different credit cards for different purposes.
He doesn’t just spend using credit cards for cashback—he also improves his credit score through wise spending.
He earns one reward point per ₹100 spent, and 1 reward point = ₹1, which he uses while planning vacations.
You should also analyze your spending and look at where you spend the most.
Try to find credit cards that give you benefits on those types of spending, and apply for only those cards.
Try to avoid too many credit cards, because sometimes it’s difficult to manage all the bills.
If you forget to pay even one, the average interest rate is 30% to 40% per year, and things can quickly get worse.
Thank you for reading blog. pls share with your friend and family.