Do you own more than 2 credit cards? Here's how to prioritise repayment on them

    The question of how to handle credit when you own two or more credit cards props up more too often, especially citing the growing trend in credit card usage and banks luring customers with lucrative offers on a number of credit cards. While some people are of the opinion that having two or more credit cards to their name gives them the opportunity for a better credit outlook, some others opine that owning more than two credit cards can potentially entrap them in a pernicious debt web. As a matter of fact, both opinions can override each other on one premise – handling of credit. So if you are a customer who owns more than two credit cards, you have two choices – to handle credit wisely and effectively and improve your credit score, or nosedive into the debt pit through mismanagement of credit.

    How does your credit score improve with more cards?

    Firstly, let us understand how credit scores work. Your credit score is calculated by accounting for various parameters including credit payment histories, the amount of credit used against the limit allocated to you (ideally, using more than half the credit limit allocated to you might work against a good credit score), your defaults, and other parameters. Usually if your credit score is low, your loan or credit card application might not see light. Even if the bank or financial institution does approve your credit application, you are most likely to pay a higher interest rate. Thus, credit scores are crucial to getting your future loan or credit applications approved.

    Coming back to the question of how your credit scores can improve with more cards, well, more the cards in your name, greater the combined credit limit. A larger credit limit will give you more breathing space to use your credit and the ratio of credit used to permissible limit will end up being low, thereby helping a better credit score.

    How to prioritise repayment on multiple credit cards?

    This is perhaps a question that often dogs the minds of credit card users. Although suggestions can be understood in theory, putting it into practice might very well be difficult. Owning multiple credit cards means keeping a closer tab on your credit usage and planning more effectively. This certainly takes more effort, as you have to make sure you don’t miss your payments and avoid overusing one particular card. Moreover, prioritising your repayments will definitely work well to positively impact your credit score.

    Firstly, your credit limits depend on your income – so making sure most of your income doesn’t end up in credit card repayments should be a paramount priority. Secondly, managing your credit on each card is the next step. As a matter of fact, having multiple credit cards can put you at a psychological disadvantage and lead you to mishandle credit simply because you have the opportunity to spend and purchase all those cool gadgets or clothing wear you always wanted.

    • As far as prioritising your repayments on multiple credit cards is concerned, here are a few tips that you can adopt to come clean.
    • If the debt on one card is too huge, convert the balance into flexible monthly instalments. This way, you can completely get rid of the debt on card over a period of time.
    • If you’ve converted the outstanding balance on one card into flexible monthly payments, make doubly certain that you don’t use the card until the debt on that card is negligible or non-existent.
    • Make sure you don’t cross more than half the permissible credit limit on any of the cards that you own. Doing so will pose to be a certain danger before you even realize it.
    • A practice that you must adopt at the very beginning is making sure that your combined debt on all three cards does not exceed more than 35% or 40% of your monthly income. Spending more than that can throw you into the debt limbo in absolutely no time.
    • Make lump sum payments on one card if the debt on that card is too high. On cards that have a decent outstanding balance, make the minimum payment two times the minimum payment.
    • Make sure you do not miss your payments. Unnecessary late payment charges are the last things you want.
    • Don’t just make the minimum payments due on the cards as minimum payments do not account for interest charges. Making a payment that is two or three times the minimum payment is advisable.
    • If you already have a credit card and want to apply for two or more credit cards, you might probably want to choose cards that attract a low annual fee.
    • Do not unnecessarily use all three cards just because you have them. Underutilization can help your credit score a great deal.

    Following these steps will make sure you handle your credit wisely and effectively. Prioritising multiple repayments will also work well to improve or maintain your credit score.

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