by Venus Zoleta, on category "Credit Card"
August 14, 2019
Many Filipinos would raise their eyebrows at the idea of having multiple credit cards. The fear of getting a credit card alone keeps people from signing up for a card—how much more getting two or more cards?
Well, the idea isn’t that harmful as it looks. There are multiple credit card benefits to consider that may even turn your finances from bad to better.
Myth: Having more than one credit card is bad for your credit score.
Fact: Multiple credit cards can actually improve your credit score.
How so? Using two or more credit cards can help you maintain a low credit utilization ratio by spreading your spending across different cards.
The utilization ratio is one of the crucial factors in calculating your credit score. The lower this ratio is (ideally below 30% at any given time), the higher your credit score becomes. This raises your chance of getting approved for a loan or another credit card, as this shows lenders you’re likely to pay your debts.
For example, your card has a PHP 10,000 credit limit and you have a PHP 5,000 balance on it. Your utilization ratio is 50% of your available balance (debt balance divided by credit limit) if you’re using just one card. It’s quicker to max out your credit limit with a single card.
However, if you put half the balance on a second credit card with a PHP 10,000 credit limit, your utilization ratio will be only 25%.
Another way to build a good credit score through multiple credit cards is consistently making full payments on time. If you’re organized and disciplined when it comes to credit card payments—especially with multiple cards—lenders will see you as creditworthy.
With multiple credit cards, you get access to a higher combined credit limit than a single card can provide.
For example, your credit card has a limit of PHP 30,000. But if you have two more cards with the same limit, your purchasing power increases to PHP 90,000.
Of course, a higher credit limit doesn’t mean you should use up all your available credit. Remember: with great spending power comes great responsibility.
There’s no single credit card that has all the benefits and rewards you’re looking for in a card.
Different cards offer different rewards for a variety of spending categories. Some cards provide rewards for travel, dining, shopping, or fuel expenses, while others have a fixed lower rate for all types of purchases. A card with maximum rewards on groceries is different from another card with maximum rewards on travel.
If you have just one credit card, you’re missing out on the chance to earn the most rewards on every purchase you make. Yes, you’re still earning rewards points or rebates, but they aren’t racking up as fast as when you use multiple cards.
A good strategy is to have different cards with maximum rewards for purchases you often make. For example, you can have a co-branded credit card with great perks from your favorite clothing store, a cashback card with a high rebate rate on groceries, and an air miles credit card to save on travel expenses.
When it comes to emergencies, it always better to be one step ahead than be caught off guard with the unexpected expenses.
Having an extra credit card just for emergency use will help you cover sudden expenses, like when your car conks out or a family member gets hospitalized. This is ideal if you don’t have enough savings or access to cash, or if you don’t want to wipe out your savings.
The best credit card for emergencies should have no annual fee, a low interest rate, a low cash advance fee, and a high credit limit.
The risk of having just one credit card is that you don’t have a backup for when it gets stolen, blocked due to suspicious activity, or declined for some reason.
For good measure, have one or two cards to bring with you and another one stored in a safe place at home (or the hotel, when you’re traveling). So when your card isn’t accepted, you can whip out an alternative card. Or when your wallet is stolen, you can use your spare card while waiting for the replacement of your lost card.
Consider getting cards from different networks like Visa, Mastercard, and American Express. This way, you have something to use when a merchant accepts only a particular credit card brand.
Do you often make financial transactions on the internet using your credit card? Consider getting a card exclusively for shopping, paying bills, and other online transactions.
Having a separate credit line for online purchase reduces the impact of identity theft or fraud. You can immediately cancel the card once you detect an unauthorized transaction on it without affecting your other cards.
Some internet use-only cards have better security features than regular credit cards. For example, the Metrobank ON Internet Mastercard sends a one-time password to the cardholder each time the card is used at participating online merchants.
If you’re strategic about your use of numerous credit cards, you can actually manage your spending better and even avoid interest charges. With different payment due dates, you may use the card with a long time left until the due date for a certain purchase.
For example, you have Credit Card A with a due date every 15th and Credit Card B whose bill is due every 30th. If you have to make a purchase on the 14th, you may opt to charge it to Credit Card B to manage your balance for the upcoming billing statement.
Keeping track of your various expenses is easier with multiple cards than with a single card—as long as you organize your credit card spending.
If you’re an entrepreneur, for instance, you may want to keep your business expenses separate from your personal expenses by getting a business credit card.
For frequent overseas travelers, an additional card just for international spending (with a dual billing feature and zero or low foreign currency transaction fee) will help manage your expenses abroad.
Now that we’ve established the different multiple credit card benefits, the next question is “How many credit cards should I have?”
Owning two or three credit cards is a good idea. Just be sure to use them responsibly and manage them properly to reap the multiple credit card benefits rather than accumulating debts.
However, if you already have a hard time managing only one card, then just stick to it. Having multiple credit cards has its pros and cons, so weigh them carefully to decide whether you’re better off having just one or multiple cards.
Over time, when you’re able to get your credit card spending on track, you may consider getting an additional card or two.