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    How many Credit Cards should an Individual have?

    Have you ever wondered how many credit cards you should hold? What is the correct number of credit cards you should have? How many credit cards are too many or too less? There is no set number of credit cards that you can own, it is about how you manage your credit cards that counts. Most of the times, individuals carry a stack of credit cards, which they hardly use and sometimes, credit cards are overused, leading to repayment issues. It is always advisable to analyse one’s needs and decide the correct number.

    Here’s a list of things that will help you determine if you have too many or too few credit cards:

    Do multiple credit cards affect credit score?

    Credit card usage have an underlying impact on credit scores. Let’s assume you have three credit cards. This means your credit limit is high as each of the three cards will have a limit of 1.5-2 times your monthly income. Credit institutions suggest using 30% of your total credit to maintain a good credit score.

    While minimal usage is one factor that impacts your credit score, there are other factors that need consideration as well. Let’s have a look at them:

    • The major factor that influences your credit score is your payment history. Late payments, defaults, paying just the minimum amount every month, etc. are some of the aspects that make up for a large percentage of your score.
    • The total amount of debt you owe makes up for almost 30% of your credit score. Owning multiple credit cards can lead to higher debts and a negative impact on your score.

    More credit cards means more rewards:

    Credit card issuers in Singapore offer lucrative offers and rewards which lures customers to sign up. Several credit cards like cashback credit cards, rewards credit cards, travel credit cards, low-interest credit cards, etc. offer a wide range of perks and benefits to different customers. Money-conscious Singaporeans prefer cashback credit cards, while people who like to travel may prefer a travel credit card, which can earn them miles and perks with every dollar spent.

    Depending on your lifestyle, it may be wise to focus on three to four credit cards and use them for most of the purchases. Spreading your expenses over these cards will help you earn more rewards points and benefits and maintain a good credit history.

    When should you get more credit cards?

    If you are good at tracking your expenses and know how to optimize your finances, then you may be able to afford more than one credit card. In most cases, the first credit card that a Singaporean holds is a cashback credit card for expenses like groceries and utilities. If you spend most of your income on restaurants, there should be a dining credit card in your wallet. If you are more likely to spend on travel, then a travel credit card will be useful.

    When should you own a few credit cards?

    All credit cards have their own billing cycle, which activates from the time you start using them. Banks will give you 27-31 days to repay the entire bill, before imposing an interest rate. If you own a couple of credit cards, then all you need to remember are two billing cycles. If you own more than two credit cards, you may get muddled and miss a cycle. This would invite late payment penalties. The problem with having too many credit cards in your wallet is that your credit score may go down. This score is very important as it determines your creditworthiness. Keeping a healthy score means easy approval of loans like home loans or education loans.

    Handling your credit cards:

    Maintaining multiple credit cards and using them effectively can benefit you in the long run. Whether you have one or more credit cards in your wallet, you need to make sure that you have a system in place to pay your bills on time and in full every month. One easy way to remember to pay your bills is to set up a GIRO deduction of your card bills. All you have to do is to fill up an interbank GIRO form to link your designated bank account to your credit card. In this way, your bill amount will automatically be deducted from your bank account every month. However, you must ensure that you have enough cash in your bank account to repay your bills. Failing to do so may incur late payment fees or high interest charges.

    Credit cards should be used as a mode of payment:

    All credit cards should be used as a mode of payment only. Credit cards give you discounts, air miles, and rewards when you purchase using them. The interest rate on a credit card is between 24% p.a. and 29% p.a. Hence, it is advisable not to use your card as a mode of credit. Place your card on a 0% interest instalment plan while making large purchases so that you can avoid late fees or high interest rates. Good money management habits can also help you avoid debts.

    Bottom line:

    After considering all of the factors, it is up to you to decide the number of credit cards you should possess. It is advisable that you avoid owning more than three or four credit cards so that your debt does not spiral out of control if you don’t manage your credit usage. Keeping multiple credit cards will have its own pros and cons and it is up to you to decide how you would like to use them for your daily expenses.

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