ONE OF my favourite pastimes while I am standing in a queue at a local supermarket store is to look at the wallets of people paying before me and try to figure out the brands of the plethora of credit cards they have. And sometimes I am amazed by the sheer number of cards people carry in their wallets these days. A couple of weeks back, while I was attending a party, the Master of Ceremony announced a surprise gift for the person who had the maximum number of credit cards. The gentleman who won it had 16 cards!
So how many credit cards should one really have? Is having multiple cards prudent or is it creating unnecessary trouble for oneself? Here's an answer to some of these questions:
Monthly billing dates:
Keeping track of the billing date of your credit cards can maximise your interest free credit period. Stop spending on the card which is closer to billing date and spend on the card that has still some way to go for the billing date. That way you maximise your free credit period because most cards give an average of 20 days to pay the bill post statement generation.
Favourite loyalty programmes:
We all are members of loyalty programmes and the large programmes typically have credit card options launched in partnership with banks, mostly in the frequent flyer and retail segment. These credit cards accelerate the earning of frequent flyer miles or retail points because of bonus rewards and pooling of credit card reward points with the loyalty points, thus bringing the member closer to redemption options in very short periods of time. I would recommend having a credit card of your favourite frequent flyer program and your favourite retail store loyalty program.
Back-up credit card:
This advice is specifically for people who have large proportion of travel and entertainment spends. While travelling abroad, limits can dry up very quickly on your favourite credit card and having a back-up credit card always helps. I advice people to carry one Visa and one MasterCard while they are travelling abroad because in some parts of the world, merchants might accept only one association brand and having both options with you might save you from a lot of trouble.
Optimally use the benefits:
These days premium credit cards come with a lot of features and benefits. They range from free movie tickets, free golf games, free access to domestic and international airport lounges etc. Usually it's very difficult to find one single card that gives you all the benefits rolled in one, so intelligent customers tend to subscribe to two or three to access the basket of benefits that they are interested in and use them judiciously to maximise their gains.
However, having too many cards has its downsides too. The perils include:
Billing dates:
Tracking payment dates properly on multiple cards can be a nightmare. In time, non-payment can result in unwelcome penal fees and interest. Use credit cards which give you an option to pay online through any bank account.
Lowering of credit score:
Each credit consumer in the country has his/her record populated in the credit bureau with an attendant credit score. The credit score is a reflection of the credit worthiness of the customer. Having too many cards can affect your credit score because the customer is perceived to be 'credit hungry' and thus more 'risk prone'. A lower credit score can lead to difficulties in procuring credit facilities from banks in the future.
Fraud attacks:
A person who has a large number of credit cards normally cannot carry all of them in a single wallet. Thus there are always some dormant cards which can be compromised if one is not careful. The misuse can happen in one's home or office as well. Even if one were to carry all of them in a wallet, imagine the trouble one has to go through to cancel all of them if the wallet were to get lost or stolen.
To summarise, I would recommend having two to three credit cards for an evolved credit user. Try to ensure that they have separate billing dates, have good usable features and options by which you can accelerate earnings in your favourite loyalty programs. Avoid credit cards that do not have seamless online payment methods. Credit cards when used properly are excellent lifestyle enablers.
