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17 Nov

How many Credit Cards should you have?

In today’s age and time everyone holds a credit card; well almost everyone! Whilst it is a convenient option for many of us….strangely it is also a “cool” option for few! Flaunting a wallet with different credit cards in a party or at a shopping mall is definitely looked upon as “cool”. 

But how many credit cards should you hold? How many credit cards make you “cool”? 

“One size fits all” solution does not work here. So a working professional can hold 2 cards and a fresh MBA could hold 1 card or maybe none. 

Firstly, the optimal number of credit cards that you could hold should depend on your “needs” and not your “wants”. If you have been holding high number of credit cards to fulfil your “wants” then take this as a warning signal. Step back, understand your budgets and then do away with that greed! 

Secondly, the trick, along with holding optimal number of credit cards is also using the credit card wisely. Having 1 credit card with upto 30-40% of utilization is better than having 1 credit card maxed to its credit limit. 

Similarly having 3 credit cards with low balances and regular repayments is better than having 3 credit cards with high outstanding balances.  

The number of credit cards held is the same…but the impact is quite different. 

Thirdly, your spending habit is a factor that impacts your decision to hold more credit cards. If you are a spendthrift then you might end up holding more credit cards irrespective of what your income and real need is. 

So there is no magic number on the number of credit cards that you should hold. However, there is one way to find out if you have been holding more than what you can manage. If you associate with any of the following points then, yes, cut down on your credit cards!  

  • You are unable to repay your credit card bills on time 
  • You are repaying minimum amount due on your credit card and building up on the outstanding amount 
  • You obtain your credit report and find open credit cards that you have forgotten about 

Sometimes less is better than more! 

Satish Mehta
Satish is a Chartered Accountant by education, a veteran of Housing Finance and a Credit Information practitioner with over 40 years of experience. He previously worked with HDFC Ltd – India’s largest mortgage finance company and was the founding Managing Director of CIBIL – India’s first and largest Credit Information Bureau. He has global experience in his chosen fields, is a Professor of Practice at a leading University and has written e-books for the World Bank on his subjects. He is passionate about learning & knowledge transfer & believes in giving back to the industry he worked in throughout his career.

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