Managing Multiple Credit Cards: Dos and Don’ts

Serving timely disbursement of funds at ease and instantly, credit cards are an effective instant access to money. The general public has the provision to hold multiple credit cards. Managing them is challenging and may require extra tips to avoid damage to one’s finances and cibil score. Considering the cibil score, one can use the cibil score app to check cibil score for free. 

Do’s to Manage Credit Cards

The Credit card holders are advised to strictly follow the below-mentioned steps: 

• Prioritise usage during the interest-free period

If a billing cycle begins and ends without balance, the cardholders get the benefit of using credit cards at an interest-free rate. Few credit cards also offer an extended ‘grace period’ of around 15 to 20 days after the payment due date. This period is interest-free. Try your best to maintain no balance on all your credit cards and use it to prevent expenditure of interest rates. 

• Strategize your needs

Understand your current and future lifestyle and accordingly decide the suitable credit card for you. For instance, ensure getting travel credit cards to reward yourself with travel and hotel booking points or credits for effortless usage of all the benefits. 

• Know payment due dates

Timely payments are one of the easiest and effective ways to maintain and improve your cibil score. Note down your due dates to get yourself reminded in case of the presence of multiple credit cards. If you find incompatible dates, try to get them changed to effectively spread the payments over the entire month. It avoids piling up all the expenditures on a single date or at month’s end. 

Another effective method is setting up reminders or choosing auto-pay. It helps to avoid late or missed payments. Besides auto pay, you can also set up an automatic payment through a bank or credit union.  

• Pay more than the minimum payment

The minimum payments curated by the banks are meant to extend the debts as long as possible. Break off the cycle and try to pay more than the minimum payments. There are no extra charges levied on this action. It avoids interest charges and reduces credit usage costs as well. Try this consecutively and use the credit score app to check credit score for free. 

• Check statements monthly

Mindfully checking credit card statements is essential regardless of your auto payment method. It ensures avoiding any problems in the statement and taking timely actions if found. The monthly statement review must focus on finding fraud or unknown transactions, looking for estimated interest charges incurred on the current balance, and acknowledging any important changes in the account. 

• Negotiate APR

The APR levied on credit cards is changeable for credit cards. Credit card users can negotiate to set the lowest APR. Having a good history helps in getting you a stand for negotiation. It is possible through discussion with customer service. The actual changes are associated with a Reserve Bank of India declaration. 

• Keep the accounts open and in good standing 

This point introduces the concept of the ‘credit age’. It is responsible for modifying your cibil score. It is determined by the length of an open account in good standing, that is, an account associated with regular transactions. The aged accounts are a source of good credit scores. Use the cibil score app to check cibil score for free. We recommend never closing your old account. Rather, find a specific usage. Try to find another use for the account if it is irrelevant or does not suit your purpose.

• Maintain income-to-expenditure balance

Maintaining a limit on expenditure is extremely necessary. Ensure to not exceed 10% of your take-home or in-hand salary when using credit cards. Use cash or debit cards to alternate your options. It applies to overall credit card payments and hence plans the budget accordingly. 

• Seek professional help

Numerous financial services are available at the current time. Credit counseling is a solution to issues concerning credit cards. It covers debt problems, increasing bills, and curating optimum methods through suggestions. The increasing waiting period or procrastination tends to add to the problem. Credit counselors are certified professionals guiding multiple and single credit card holders. 

• Eliminate credit card debt before loan application 

Credit cards affect your loan application in two ways: one, they affect the credit score, and second, they require meeting the threshold debt-to-income (DTI) ratio. The multiple hard inquiries due to multiple loan applications have a negative impact on credit scores. Additionally, the desired DTI ratio should be below 41%, inclusive of new loan payments. It involves checking the monthly income and debt payments to understand your financial status and ability to pay the loan. 

• Use extra features

Credit cards often come with extra features, including credit score tracking or fraud prevention services. Use the Cibil Score app if offered to check Cibil Score free, which may have alternatively been offered at a specific or high price. 

• Be clear about cosigning

College students who are unemployed and independent require a co-signer before getting issued credit cards. The applicants or credit card holders must understand that the co-signers are responsible for the debt but not to make charges on the account. The excess expenditure and balance are also associated with issues to the co-signer. 

• Utilize the credit card rewards 

Choosing the right credit card is extremely important to fully utilize the benefits. Opt for it according to your lifestyle to utilize the rewards. Pick the one with free gas, point rewards, cash back, or airline miles, depending on the frequency of usage of such times. The usage of rewards should also be strategic rather than random. The effective reward would include utilizing the cashback on specific purchases. Now, further, use this cashback to pay the full bill. You will have an interest-free credit card. 

• Utilise the lowest APR credit card

Protect your rewards by using the lowest APR credit cards for high-cost purchases. The high-cost purchases refer to the ones requiring multiple billing cycles to complete the payback. The method will reduce the cost of paying back to banks. 

Don’ts to Manage Multiple Credit Cards

Knowing what not to do is equally important. Here are some of the things to avoid. 

• Avoid usage of reward credit cards when unable to pay off the balance

Earning rewards must always be coupled with a smart approach. Earning and using the rewards but paying higher amounts leads to a hole in the pocket and mismanaging the finances. For instance, applicants get a 2% cashback offer but must further deal with 25% APR for multiple billing cycles. The timely payment on such cards will be associated with interest charges over the earnings, leading to your loss. 

• Avoid missing payments of more than 30 days 

Owning credit cards comes with a responsibility to efficiently and timely pay back to the bank. Your aim should be to avoid late fees. Pay it within 30 days else the credit card issuer will report missed payments. The missing payments will be reflected for seven years on the credit report, causing a significant impact on your credit score and your applications to the bank. 

• Avoid the usage of credit cards as an income source

Relying on credit cards to meet your daily expenses adds to the problem. The credit card operates on a revolving debt system; hence, the minimum payment increases with accumulating balances. Thus, the continued expenses will grow the credit card bills, leading to lesser disposable income. The negative effects of such a lifestyle can lead to bankruptcy. If it is currently happening with you, immediately stop your expenses and reflect on your budget. Do connect with a credit counselor for better advice. 

• Avoid maxing out credit cards 

Maintaining credit utilization is another extremely important factor in managing debt. Act to maintain a good credit score by not utilizing more than 30% of the available credit. Avid maxing out the credit cards. Also, be regular in using the cibil score app to check cibil score for free. 

• Avoid opening an account only to claim the offer 

Open a new account only if you actually need it. Luring the candidates with special and multiple offers is their business. Judge your capacity to pay the bill and subsequently take the right action. If you are receiving an interesting and beneficial offer, research it well and check if it meets your needs before claiming it. 

Frequently Asked Questions

Q1. Are there disadvantages to owning a credit card? 

Ans. Yes, there are certain disadvantages like hidden costs, high interest rates, restricted drawings, and the habit of overspending, among others. 

Q2. What is the number 1 rule to keep in mind while handling credit cards?

Ans. Always make sure to pay bills timely. Additionally, use the Cibil Score app to check cibil score free as delayed payments can impact your credit scores.

Q3. Are there benefits of owning credit cards?

Ans. Yes, there are benefits of owning a credit card as well. It enhances financial health, helps in easy loan approval, improves credit scores, and provides funds in emergencies. 

Q4. Who is eligible for a credit card?

Ans. An applicant with a minimum of 18 years of age is eligible for the credit card. 

Q5. What is the maximum credit utilization ratio?

Ans. The 30% credit utilization ratio is the suggested ratio by credit experts.