Credit Cards: Why is this okay to keep more than one card? An explainer

If you are a credit card user, you may have already received a few phone calls from other banks offering their cards. Your standard response in this scenario could be – when you already have one card, why on earth would you opt for the second one? The concern is not irrational, but it calls for nuance.

There are several instances in which it is recommended to opt for the second credit card. These are some of the key reasons for choosing more than one credit card.

Why you may keep two or more credit cards

I. When you want to build a credit report: At times, card users opt for a credit card to build their credit report. In such a case, you may decide to keep more than one credit card.

II. To expand your credit limit: One credit card may have a credit limit of ₹5 lakh, and if you keep two cards, the total limit will expand to ₹10 lakh. So, if you need a higher credit limit, it is recommended to keep two credit cards.

III. For a better credit score: Another reason for two credit cards could be to bring down your credit utilisation ratio. For instance, when you use ₹4 lakh out of your total limit of ₹5 lakh, then you end up exhausting 80 percent of your credit limit.

However, when you keep two or more credit card(s), you can split the card usage between them to bring down your CUR. This, in turn, helps you improve your credit score. It is vital to note that the ideal credit utilisation ratio is 30 percent.

These are some of the scenarios when keeping more than one credit card is not advisable:

1. You do not use your card often: When you do not use your credit card regularly, it is better not to apply for another card. However, it does not mean that you should also cancel the existing card. Here is why. 

2. Your usage of your current credit card is lower than 30 percent: Since one of the key reasons for applying for the second credit card is to improve your credit score, it works only when your credit utilisation is higher.

However, suppose your current card’s usage is less than 30 percent month after month, then it is futile to apply for another card – at least not to improve your credit score.

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