Want to improve your credit score? Holding more than one credit card may help

Do you hold a credit card and plan to procure one more amid some confusion and doubts?

If that is the case, then it is vital to remember that holding more than one card is not unwise as long as you use both rationally. One of the key advantages of having two or more credit cards is to improve your credit utilisation ratio, which refers to the percentage of available credit you currently use. It's one of the key metrics for computing your credit score. 

For instance, if your total credit limit is ₹5 lakh and you have already used a credit of ₹2 lakh, then the credit utilisation ratio would be ₹40 per cent. 

The ideal credit utilisation ratio is 30 per cent. One may wonder how two credit cards can help improve it.

How does holding of two credit cards help?

When a card user holds more than one card, one gets the flexibility of splitting the total bill across cards. Let us imagine you have a credit card with a total limit of ₹5 lakh, and you want to use it up to ₹3 lakh, i.e., 60 per cent of the total limit. But if you keep two cards with a ₹5 lakh limit each, you can determinedly use only a part of the credit in each card – say ₹1.5 lakh.

In the second scenario, you have used only 30 per cent of the total credit, thus significantly bolstering your credit score.

There are some other benefits of using more than one credit card, which we have listed here.

Key advantages of holding more than one credit card

1. Multiple perks: When you hold more than one card, you can use the flexibility of earning reward points through one and discounts through one. If you are a frequent traveller, you can use one card for travel and the other for regular usage.

• Credit score: Holding more than one card allows you to demonstrate a history of consistent payments, which can positively impact your score.
• Longer credit cycle: If you have difficulty making a payment on one credit card during a month, the other card can come in handy to pay its bill. Although this is not a healthy practice in the long run, one can indulge in it once in a while to stagger the credit period across two months.