OWNING a credit card has its benefits. It provides flexibility and convenience, especially when you’re short of cash and need to pay-off something in case of an emergency.
However, is it wise to own multiple credit cards?
While there are pros and cons to this, experts believe that individuals need to consider various factors before deciding on whether they should get a second (or another) credit card.
Success Concepts wealth and retirement planning consultancy chief executive officer Dr Joyce Chuah (pic) believes that an individual should only consider owning another credit card if he or she needs the additional credit limit. “Evaluate if the credit limit is needed and how it stacks up against your current limits, without compromising your current cash flow,” she told StarBiz.
“Or, if you are attracted to the additional credit card which offers more attractive benefits, such as retail and dining discounts, travel benefits such as insurance, lounge access, or better spending reward points,” Chuah added.
She explained that many individuals tend to also opt for an additional card if they prefer the issuer’s customer service, the credit card’s reputation and more favourable terms and conditions.
“Perhaps you want to complement the card’s different billing cycle and align it well with your existing card, allowing you to fully take advantage of a 21-day interest-free period. Or, if you like the annual fee waiver terms particularly hitting a certain spending threshold.”
Chuah however noted that not all issuers offer annual fee waivers, while some only offer partial waivers.
Moreover, she said an individual should only consider multiple credit cards when they are confident in managing their debt.
“Review your current spending habits and debt management to ensure that adding another card won’t complicate payments or lead to overspending.”
Multiple cards benefits
Having a second credit card does come in handy, if something happens to the first one, said Jeremy Tan of financial planning consultancy, Excellentte Consultancy Sdn Bhd.
“It is useful in the event the first card, for whatever reason, is not able to process the purchase transaction.
“Examples include if the first card is not acceptable by the merchant due to technical issues, or if there has been a fraudulent transaction involving your card and you need time to get a replacement card.”
Tan added that a back-up card also comes in handy if the first one is lost or stolen.
“In the event that the credit on the first card has reached its utilisation limit, the second card can be used to pay for the difference for big ticket items or purchases.
Additionally, Tan said individuals prefer to own multiple credit cards for different uses.“For example, one card could be for family expenses, while another one may be specifically for business purposes,” he said.
Tan also noted that owners of multiple credit cards are sometimes privy to different types of rewards and benefits from the issuing banks.
“By having another credit card from another bank, an individual may be able to enjoy benefits not offered by the first card.
“For example, the second card may come with dedicated travel benefits, where spending can be converted into air miles for travel.”Detriments of multiple cards
Individuals with poor credit history definitely should not consider owning more than one credit card, said Chuah.
“This lack of financial discipline is a clear indication of ineffective debt management. Over time, these behaviours not only impairs your Central Credit Reference Information System score, but also lead to higher interest payments, late fees, and long-term financial instability.
“Poor spending habits, such as relying on credit for everyday expenses or making impulsive purchases, further compound the problem.
“For those struggling with debt management, it’s crucial to address these underlying issues before considering new lines of credit.”
Additionally, Chuah said one should not own another card solely for the incentives, such as sign-up bonuses or attractive gifts, without fully understanding the associated fees or terms.
“While the welcome gifts are tempting, the card may come with hidden costs, such as high annual fees, or spending requirements. Focusing on short-term rewards can easily lead to long-term financial challenges if the terms aren’t fully considered comprehensively.
“If you are already managing more than three credit cards, adding another could complicate your financial situation.”
Chuah stressed that juggling multiple payment deadlines and balances increases the likelihood of missed payments, late fees and higher interest charges.
“With too many accounts, tracking spending and staying on top of financial obligations becomes more challenging, potentially leading to further financial difficulties and distress.”
