Is It Good to Have Multiple Credit Cards?

Have you ever heard of Walter Cavanagh from California? He made it to the Guinness Book of World Record in 2016 for owning the most extensive and exhaustive collection of credit cards. With 1497 credit cards stored in a 250-feet-long wallet, Mr. Cavanagh had 1.7 million USD in credit! Unfathomable, isn't it? Do you aspire to be like Mr. Cavanagh?

In the modern age of plastic money, people simply love credit cards! Well, what's not likable in them?! The attractive discounts, the promising reward points, the lucrative freebies, the plentiful perks, the quick access to funds, the interest-free financing; the list just goes on. 

But is it ok to have too much of a good thing? Can one have multiple credit cards? Is there a limit? Well, technically, the answer is 'no.' There isn't any extant law or industry standard that restricts the number of credit cards a customer can have. But is your credit score at risk? Let’s go ahead and examine this further.

Advantages of Multiple Credit Cards

Why don't you do a quick count? I bet you have multiple credit cards, and I'm sure you can relate to a few of these reasons for the same:

• Many retailers don't accept credit cards of certain card networks. If you have multiple cards, you can just use your Visa or Mastercard in circumstances where your Amex card doesn't work.

• It acts as an emergency backup that gives you quick access to funds. If you lose one, you can always rely on another.

• A travel credit card is undoubtedly a great companion during overseas travel. Many of these have no foreign transaction fee. It's a good addition to the kitty.

• A separate business credit card ensures that you manage your personal and work-related expenses well.

• When used responsibly, multiple credit cards help in improving your credit score over time.

• Reward credit cards are very lucrative; the more cards you have, the more reward points you earn. Same goes for cashback credit cards.

• Huge signup bonus offers often tempt people to add more cards to their wallets.

• Frequent travelers tend to have many co-branded credit cards in order to earn more rewards or loyalty points, airline miles, airport lounge access, and other travel-related perks.

• Many cards come with some shopping and travel protections. People often end up with multiple credit cards just to enjoy the benefits of free travel insurance or purchase protection.

All that's great, but is it there a limit on credit cards that a person can have?

In Theory...

In theory, plastic is unlimited - you can get as many credit cards as you want.

Credit card issuers typically don't check the number of cards you have while deciding whether to approve you for a new one. Several other factors, like your income, your debt-to-income ratio, and your credit score, are used to make this assessment. Moreover, too much available credit doesn't harm your credit score given you pay them responsibly.

Thus, a large stash of credit cards won't keep you from getting more in the future. What matters is an outstanding credit balance. If you have a high balance in your credit cards, it's quite possible that you'll get denied more credit.

In Practice...

Taking too many credit cards can put you in a dicey situation. Although there isn't any defined limit, you might run up against a cap in certain circumstances. Lenders might not be comfortable with giving you an unlimited amount of credit, which means that you could be denied a new card since you already have too much open credit on other cards. Let me share a personal anecdote.

I've always been a smart credit user. I had carefully picked up four credit cards that catered to my needs and strongly resisted the urge to take more. My total credit limit, among all of my four cards, was Rs.3 lakh. Suddenly, in 2017, a renowned Indian lender introduced a new card - let's call it 'Card-5.'

Now, despite my strong determination to resist the temptation, I really liked the rewards program of Card-5 and wanted to add it to my portfolio. However, since I already had a whopping Rs.3 Lakh as my existing credit limit, the lender wasn't comfortable to extend more credit to me. They told me that my application would most likely get rejected - not because of the number of cards I had, but because of my total amount of open credit.

The Dangers of Multiple Credit Cards

They say that too many cooks spoil the food. Similarly, too many credit cards can spoil your credit health in several ways.

• The world of credit cards is nothing short of an enigma. Using them ignorantly is a recipe for trouble. Don't invite too much trouble.

• Too many credit cards often lead to baseless overspending.

• With too many cards on your plate, you might miss payments and end up carrying a balance on most of them, accruing interest.

• You'll most likely have trouble managing multiple cards and lose track of which one should be used for which type of spending.

• If you mess up any of these, you could very much be heading towards a pit of credit card debt!

Set Some Ground Rules

Hypothetically, you can get as many credit cards as you want. However, it's definitely not a good idea to jump onto the bandwagon and sign up for every credit card that strikes your fancy. Multiple credit cards in your wallet can be quite a trouble if you're not very organized. You need to set some ground rules for yourself.

1. Apply for credit only when you really need it.

2. Don't follow the fad and grab a popular card - carefully pick the card that's actually beneficial for you, keeping your lifestyle and expenditure pattern in mind.

3. Strategize your spending so that you can capitalize on the specific benefits of each card.

4. Be disciplined while using the wonder cards.

5. Keep a calendar of all your payment due dates so that you don't miss even one.

6. Make a budget and stick to it.

7. Since there's no formula to decide how many credit cards should one have, just stay safe and don't exceed three, as a rule of thumb.

To Sum Up

If you're still sitting on the fence, trying to figure out your next step in the world of credit, take a step back and think before applying for a new credit card. If you are a pro, and you know what you're doing, then take my advice with a pinch of salt. Check your credit score, and let it speak for itself.

If you can smartly manage your credit portfolio, you might be another Walter Cavanagh in the making! Just make sure that you stay secure and happy.