These days, most salaried individuals are preoccupied with one concern after receiving their monthly income rising credit card bills. Many people have more than one or two cards. Paying bills on different dates and keeping track of payments becomes difficult. Missing a payment on any card during this time directly impacts your CIBIL score. This is the score that determines your financial credibility for any loan or credit facility. One mistake can significantly impact your future loan approvals.
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One in three people has more than two cards
With the rise of digital payments and cashback culture in India, credit cards are no longer just a means of purchase but a trend. According to recent reports, one in three credit card users in the country owns two or more cards. This is due to attractive rewards, discounts, and bonus points. However, this very glamour often disrupts financial discipline. Having more cards doesn’t mean you have increased financial freedom. Rather, it multiplies your responsibility.
Who is a Trustworthy Customer?
In the eyes of banks and financial institutions, a trustworthy customer uses their credit limit judiciously. Suppose you have two credit cards with a total limit of ₹200,000 and spend only ₹50,000. Your credit utilization ratio would be 25 percent. This tells banks that you are not overly dependent on debt. This ratio should be below 30 percent to maintain a good CIBIL score.
How Your CIBIL Score Declines
If you repeatedly apply for new cards, a ‘hard inquiry’ is recorded on your profile. This signals to banks that you are constantly trying to borrow money. This can lower your credit score. Furthermore, if a credit card bill is not paid on time, it is recorded as a default, impacting your overall CIBIL score. Many times, people close old cards to save annual fees, but this weakens their credit history. As a result, banks may consider you financially unstable.
How Many Credit Cards Is It Right to Have?
According to financial experts, if you have a moderate income, two to three cards are sufficient. Business professionals or travelers can have up to four cards, but only if they can pay all the bills on time. Having more than this number makes it difficult to track payments, which can impact your financial discipline.
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Develop a Wise Financial Strategy
Having multiple cards is not wrong, but managing them is a big responsibility. Just as a balanced investment portfolio needs to be carefully managed, cards should also be used wisely. Spending low, making timely payments, and spending below the limit strengthen your credit profile. However, spending beyond the limit or paying bills late limits your financial freedom.
