Disadvantages of having excessive credit cards?
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I currently have 4-5 credit cards. But now I am seeing a lot of offers of LTF credit cards (AU bank, Indusbank, etc).
My question is: What are the disadvantages of keeping too many cards. Is it that I will not be able to close it smoothly? Etc?
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With every increase in a number of credit card, chances of defaulting the payment increases.
Apart from that I don't see any negative impact of owning too many credit cards.
will there be any issue if we have multiple cards but stick to 1 or 2 cards and do not use rest of them for months ?
1. The need for a bigger wallet
2. Risk of losing them all at once (too much work to block all of them and get replacements)
3. Need a set-reminder for at least one transaction every 12 months to avoid card closure (all) / conversion to paid (select cards*)
- Income to debt ratio goes up substantially. Even if you are not actually using the credit limit, you have the option to. That is red flag for credit card and loan providers to issue you with more cards or loan in future. It's advisable to reduce your unused and open credit lines 6 months before taking any home loan.
- A while ago (around 4 or 5 years ago) when I applied Personal loan in HDFC bank, they checked my Cibil and asked me the following things: You have more limit on your credit cards, which increases your risk ratio. So, if possible call those banks and reduce limit otherwise get reduced loan amount as per bank risk criteria.
- Even if you have a good credit score and credit history, still the high count of credit cards and their high credit limit does impact approval of home loans. The total credit limit to your income ratio shows your credit hungry nature, even if your utilization ratio be low.
Also the risk of classic debt trap or paying for one card using another.
(Or repaying one loan, by taking another.. too are classic pitfalls, in my view).
The North American culture of living out of cars/ trailers and spending more than the earnings.. has started percolating deep.. in South Asia too.
Thus the moral or social aspects too creep in.
Frugal values run the risk of getting replaced with 'we will cross the bridge when it comes'... or worse.. the 'who cares' (living in the moment) lifestyle.
One of the major pitfalls could be the loss of over-all financial discipline and lack of self-restraint in general.
I don’t think there is any harm if you are disciplined and not living hand to mouth. I have 12 credit cards with total limits of around 75 lakhs. I keep applying for and getting new ones as needed. I wouldn’t mind having 25 or even 100 if it helped me. My immediate goal is to take my total credit limit to 1 crore. I never need to apply for a car or home loan and there is no danger of taking on debt as this 75 lakhs total limit is a comparatively small amount for me. So I always pay off any usage no matter how high. Many are not used at all except once in while to keep them active. I don’t carry all with me either. I only carry 4 or 5 frequently used ones. It is all based on utility. Like I have Airtel broadband and mobile and Airtel launched a card with Axis that provides 25% cashback on Airtel payments. Hence I got one more card. SBI came out with cashback crd and I loved the 5% on all online merchants so I got another one. This is how I keep adding new cards.
Coming back to the discussion, I don’t think there is any disadvantage at all in having a lot of credit cards. The more the better. If a person is not disciplined then he or she can get into debt with just 1 or 2 cards as well. So it makes no difference whether you have 2 or 20. It doesn’t affect you credit score either. Mine has never gone down with adding or closing any number of cards. So get all the ones you can and enjoy.
AFAIK, this won't have an impact on your credit score at all, if and only if you do pay off the dues next cycle.
This is something I was told by an AMEX rep, where I had the same issue, where I missed a partial payment. They said that once in a while, missing the total dues, is not a problem as long as it's not a frequent occurrence and as long as the minimum amount due is paid off.
It impact your credit score in short term as new entry card for your PAN card creates a new enquiry and the score falls
you should forget about CCs you own. Credit cards are not basic need of humans.
They are designed in a way that end user spends more instead of saving the funds.
I would advise you to save money, spend less unless you are rich
It costs you mental peace and makes you spend more.