Why people choose multiple cards Most Indians believe it is a good idea to have two credit cards so that they have more purchasing power or receive better rewards. Given the benefits offered by banks—whether it is cash back on online shopping or free lounge passes—two, or even three, cards appear to be a good idea. But while the advantages are real, the second card also adds to responsibility, and if poorly managed, leads to accumulating debt and higher interest charges.
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The benefits of a second card Improved credit utilization is one of the biggest benefits of a second credit card. Indian credit bureaus consider usage ratio to available limit while computing your credit score. You can keep utilization low, thus your score would increase by spreading the spends between two cards. Second card is also insurance against loss, theft, or short-term blocking of one card. Also, Indians typically carry standalone cards for specific rewards—i.e., travel reward card and a fuel or grocery cash back card.
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Potential risks and pitfalls While the rewards are very appealing, the risks can't be ignored. Paying multiple payment due dates increases the chances of missing a bill payment, for which there is a late fee and 36-42% annual interest payments on revolving balances. Overspending is another problem—being able to spend more can create a pattern of reckless spending. Having most credit cards also result in minimum payments, debt traps. These risks are amplified in India's competitive credit market that offer regular temptations and accessible pre-approved credit limits.
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How a second card impacts your credit score Adding a new card triggers a "hard inquiry," which can dip your credit score in the short term. But provided you use both responsibly—pay on time and keep low balances—the long-term effects are beneficial. The higher aggregate credit limit is a blessing for your credit utilization ratio, one of the critical scoring factors. For young professionals and freelancers looking to build a credit history, two responsibly maintained cards can be the launch pad for greater financial credibility.
Precautions before geting a second card Before acquiring another card, assess your repayment patterns and income level. Choose a card that complements the other one—if your first card offers dining rebates, opt for one that offers travel or online shopping rewards. Find out the joining fee and annual fee to ensure that the benefits outweigh the costs. It is also wise to place auto-debit instructions for at least the minimum amount payable on all of the cards to prevent defaults inadvertently. Borrowers with irregular incomes should exercise special caution because some EMIs and card bills can drain money over a short time.
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The correct balance A second credit card may prove useful if judiciously chosen and utilized with prudence. If you are someone who pays in full each month, it is more rewarding and convenient. For others who overspend or have already accumulated debt, it contributes to financial stress. The decision needs to be less about what the banks are promoting and more about your own money use. Credit cards are instruments, after all—whether you create wealth or accumulate in debt is up to you.
