Many people use multiple credit cards for different purposes. Often these cards belong to different issuers or banks, but some people like to use different credit cards of the same financial institution. This could also be when you have an old credit card, and you want to upgrade it, but you then decide to continue with both the cards to avoid the immediate closure of your old card.
Using two or more credit cards from the same bank can be useful, offering a variety of benefits. However, before choosing to have multiple credit cards from the same bank, it is crucial to comprehend the necessary details.
Benefits:
* Enhanced Rewards and Benefits
Banks often offer different credit cards tailored to specific spending categories such as travel, dining, shopping, and fuel. By having two cards from the same bank, you can maximize your rewards by using each card for its designated category. For example, if one card offers high rewards on travel and the other on dining, you can use them accordingly to maximize your benefits.
* Simplified Management
Managing multiple credit cards from the same bank can be more convenient. Many banks provide a single online banking platform where you can view and manage all your accounts. This makes it easier to track your spending, monitor statements, and make payments, reducing the hassle of dealing with multiple banks.
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* Increased Credit Limit
Holding multiple credit cards can potentially increase your overall credit limit, which can improve your credit utilisation ratio (CUR) – an important factor in your credit score. A higher credit limit with responsible usage can positively impact your credit score, making it easier to secure loans and other financial products in the future.
* Special Offers and Discounts
Banks often extend special offers and discounts to their credit card holders. With two credit cards from the same bank, you might have access to a range of these promotional offers, including cashback deals, discounts on shopping, and exclusive event invitations.
Considerations and Potential Drawbacks
* Increased Risk of Debt
While having multiple credit cards can enhance your purchasing power, it also increases the risk of accumulating debt. It’s essential to use the cards responsibly and avoid spending beyond your means. High-interest rates on unpaid balances can quickly lead to significant debt.
* Annual Fees
Many credit cards come with annual fees, and having two cards means paying double the fees. It’s crucial to evaluate whether the benefits and rewards from the second card justify the additional cost. Some banks may waive the annual fee for the first year or offer discounts on fees for existing customers, so it’s worth checking these details.
* Impact on Credit Score
Applying for multiple credit cards within a short period can negatively impact your credit score due to hard inquiries on your credit report. Additionally, if you fail to manage your cards responsibly, high balances and missed payments can adversely affect your credit score. Setting up automatic payments and reminders can help mitigate this risk.
Tips for Managing Multiple Credit Cards Effectively
Adhil Shetty, CEO of Bankbazaar.com, explains, “Regularly check your account statements to keep track of your spending and ensure you stay within your budget. You can also use the bank’s alert services to get notifications for payment due dates, transaction limits, and unusual activity.”
He adds, “Always make at least the minimum payment on time to avoid late fees and interest charges. Make sure you understand the reward structure of each card and use them strategically to maximise your benefits.”
It is important to remember that you must spend what you can afford to pay off in full each month to avoid accumulating interest and debt. Having two credit cards from the same bank can offer numerous benefits, but it requires responsible usage. By understanding your cards fully, you can make the most of your credit card benefits.