How Many Credit Cards Are Right For You?

“To improve is to change; to be perfect is to change often.” -Winston Churchill. The payments ecosystem has seen changing consumer preferences over the years.

Consumers are now leaning towards credit cards, marking an increased growth in card usage after the pandemic with a spike of 16.2% in transactions, from ₹ 2229.30 lakhs in April 2022 to ₹ 2592.55 lakhs in April 2023. Along with changing consumer purchasing patterns, credit card spending reached an all-time high of ₹ 1.37 trillion in March 2023.

While there are multiple reasons for the growing preference for credit cards, newer entrants like fintech, new-age banks, and partnerships of merchants with banks are now providing customers with best-in-class services. In times of hyper-personalisation, gone are those days, when one credit card would suffice for all needs catering to different interests of consumers.

Having said that, the question remains the same. How many credit cards are right to have? There is no specific number as to how many cards are beneficial for a cardholder – it depends on one’s lifestyle, spending, and use of credit. Below are a few tips that will help you decide:

Maintain the Credit Utilisation Ratio: Having multiple credit cards help maintain the credit utilisation ratio (CUR) as the consumer would have more than one card to divide the spending on each card. For instance, if you have multiple credit cards and you spend only 40% of the credit limit on each card, your CUR will automatically be well maintained.

Extra benefits: Each credit card has its own unique proposition for a particular segment. Different cards designed for various categories translate into better benefits across spends. It is important to understand your needs and interests to reap the best rewards and offerings.

Avail benefits from the interest-free period: Paying off your credit card bills is an effective way to avoid default or high-interest rates. This interest-free period lasts from 18 to 55 days after making the transaction, depending on your issuer bank. With multiple credit cards, you can use them all smartly to gain maximum benefits from the interest-free period of each credit card.

Having multiple credit cards works best when one knows how to use them responsibly. Use them wisely and monitor your expenses across all cards to avoid overspending or defaulting. The right number of credit cards to own will depend on an individual’s financial goals and the judicious use of each card.

-The author is head of products, India and South Asia at Visa. Views expressed are personal.