The Indian credit card industry has been witnessing tremendous growth, fuelled by fintech disruptions and structural overhauls over the past decade. The industry has registered a CAGR of 20% over the last four years – an impressive feat. As of 2021, there were approximately 62 million credit cards in circulation.
Since it is impractical to find the best credit cards in India that provide all the perks, it is common for credit card users to utilize multiple credit cards. The average Indian credit card user has access to 2.2 credit cards, according to a report by Credit Sudhaar. Multiple credit cards allow users to make the most of their credit card payments. They can earn multiple rewards in different categories, such as gas, travel, dining, etc.
This article will discuss the different types of credit cards in India used in India and conclude with six tips to smartly utilize multiple credit ways.
Types of credit cards used in India:
With over a hundred credit card offerings, consumers have many choices. Each card has unique features and is fit for a specific purpose. For example, travel credit cards are geared toward frequent travelers and provide discounts on travel expenses. Similar credit cards used in India are:
1. Reward Credit Cards are best suited for shoppers. They offer reward points on every purchase made. These reward points can be redeemed to buy more products.
2. Travel Credit Cards are designed specifically for travelers. The reward points are earned on travel-related expenses, such as flight booking, hotel accommodation, etc.
3. Business Credit Cards are accessible by every business – small or large. This allows the cardholder to earn rewards on business expenses.
Apart from these three, there are multiple credit card offerings. Some such offerings are Student Credit Card, Cashback Credit Card, Entertainment Credit Card, Lifestyle Credit Card, etc.
6 Ways to Smartly Utilize Your Multiple Credit Cards.
1. Pick credit cards that suit you. Choose those credit cards that suit your spending pattern. Different credit cards reward different spending patterns. You should select those best credit cards in India that will be beneficial to you. In addition to the perks and benefits, you should also consider the interest rate charged. The interest rate offered differs from bank to bank. Conduct thorough research on each card’s offerings. Select those cards that provide the most benefits at a low-interest rate.
2. Track each credit card separately. Each credit card has a varying credit limit, due dates, interest rates, and credit utilization ratio (CUR). A CUR of 30% is generally recommended. You should be aware of the terms of each card and utilize them accordingly. Mismanagement may lead to missing out on due dates or maxing out your card, affecting your overall credit score.
3. Manage your spending. Having access to multiple credit cards can result in enormous debts. Create a budget plan and stick to it. Each credit card should serve a specific purpose. Different cards have different rewards systems tailored for specific end-use. Knowing when to use a specific card can maximize your rewards. For instance, you should use your travel credit card while booking a flight or hotel. Similarly, use a reward credit card while shopping.
4. Pay on time. If you are using multiple credit cards, you will receive different bills for each card. Paying off credit card bills on time will positively impact your credit score. It will help avoid late fees. There are multiple applications to track your due dates and pay your credit card dues. You can set up an autopay feature to automatically pay your bill. Most card issuers allow you to change your due dates. If your card issuer provides such a facility, change your due date to a date that works for you.
5. Avoid Carrying Balance. Carrying over a credit card balance hurts your credit score. If your credit card issuers charge a high-interest rate on carry-over balances. There is a possibility of you racking up huge payment dues from the interest rate alone. While not ideal, if you have to carry over your balances. Do so with the card that charges the lowest interest rate. If paying all off dues seems tough, settle the bill for the card with the highest interest rate first and foremost.
6. Evaluate annual fees. Credit cards that charge an annual fee offer more benefits to their cardholder. It is difficult to find cards with the same reward systems as those with annual fees. Ensure you are benefiting more from the rewards and offers than the annual fee charged. Regularly evaluate your annual fee. For instance, if you are paying an annual fee of Rs. 3,000 but earned reward points worth around Rs. 2,000. Then, you are losing money, and paying the annual fee makes no sense.
Using multiple credit cards can be great for your credit score if used wisely. This depends upon how well-managed your credit cards are. Use the tips given above to judiciously utilize your credit cards and benefit from reward points, offers, and discounts.