You may wonder why people have multiple credit cards in their wallets. I suppose it is true that you only really need one to shop, especially if you have a high credit limit. However, there are advantages to having more than one credit card in your possession. Of course, I should preface this with the assumption that you use your credit cards responsibly and you are not in debt. Here are 7 benefits of having several different credit cards.
1. Extra Perks for Banking and Having a Credit Card from the Same Institution
If you have a bank account already, your bank may offer you a special promotion for having their credit card as well. For example, if you are an HSBC Advance customer, you should get the HSBC Visa Advance Card as well. This rewards credit card offers up to 3.5% cash back on all your purchases. For HSBC Advance banking customers, cash back is capped at S$125 monthly or S$1,500 a year. For non-HSBC Advance banking customers, cash back is capped at S$70 monthly. It "pays" an additional S$55 a month to be an HSBC Advance customer.
2. Maximize Higher Rewards Rate in a Category
Different cards have different rewards rates in different categories. Some credit cards have a flat cash back earn rate of 1.5%. However, others offer higher savings in a certain category, such as petrol transactions. For example, if I am refueling my car, I would choose to use my OCBC 365 Credit Card instead of my HSBC Visa Advance Card because I earn up to 24% cash back, instead of up to 16% cash back, respectively. Of course, this requires knowing your credit cards well. Hopefully, you’ve researched and studied the perks and benefits of each of your cards before applying for them.
3. Take Advantage of Welcome Bonuses
If you have several big-ticket items to buy, or you are planning your wedding, for example, you may want to consider applying for a new credit card. This is especially true when there is a large welcome bonus for signing up. For instance, the American Express True Cashback Card offers S$60 CapitaVouchers after your first transaction in the first month. Moreover, in the first 6 months of your credit card, you earn 3% cash back, up to S$150 for spending S$5,000. After those 6 months, the cash back earn rate drops back down to the standard 1.5%. It is worth noting that you should not apply for credit cards often or on a whim. This is a thoughtful decision to take advantage of the existing need to spend a certain amount of money while earning cash back through a credit card’s welcome offer.
4. Gives You Financial Flexibility in Case of an Emergency
In the event of an emergency and you need to pay an unexpected bill or make a large purchase, having multiple credit cards increases your spending limit. However, be careful if you do not anticipate having the money to pay off this debt before the next billing due date. It is never a good idea to max out a credit card nor to have an outstanding balance. Nonetheless, in the event of an emergency, more credit cards give you financial flexibility by increasing your spending power.
5. It Can Help Your Credit Score
It is not advised to open several credit card accounts at the same time. When you apply for a credit card, the card issuer makes an inquiry into your credit score, which may lower your credit score a few points. However, gradually adding to your wallet will help boost your credit rating for a couple of reasons. First, multiple credit cards increase your credit limit. This means that your credit utilization, or the ratio of your outstanding credit card balances to your credit card limit, is less. The lower the ratio, the higher your credit score. Second, if you pay all your credit card bills on time, you are proving to be a responsible user, which increases your credit score as well.
6. Retailer-Specific Credit Cards May Offer Better Rewards
I am very selective about which retailer-specific credit card I keep in my wallet. Normally, I don’t care about their welcome offers because retailer-specific credit cards are notorious for having higher interest rates, their welcome offer usually only applies to your first purchase, and the credit card is restricted to that store exclusively. However, I do have a few retailer-specific or brand cards. Retailer-specific credit cards are beneficial only if their rewards are better than your general credit card. For example, my cash back credit card offers 1.5% cash back on any purchases.
However, my retailer-specific card may offer me 5% cash back as well as additional perks, such as early access to a sale or free shipping. That is fantastic! Also, it feels good when the merchant thanks me for using their credit card. If I have a store’s card, it means I shop there often and I truly love their brand.
7. More Access to Airport Lounges
If you are strategic about your credit cards, you can have access to multiple airport lounges around the world. Most credit cards give you 2 or 3 complimentary visits to an airport lounge. Some credit cards are more specific about which lounges you can go to. However, having different credit cards gives you more opportunities to relax in different exclusive lounges. For example, the DBS Altitude Card gets you 2 free visits to all Priority Pass lounges by applying for the Priority Pass Membership. However, the Maybank Horizon Visa Signature Card gives you access to 1 visit to the Ambassador Transit Lounge in Singapore.
Logically, if you plan out your visits and which airport lounges you want to go to and when, you can maximize all the visits of your credit cards pooled together. Of course, this benefit is only attractive to a very enthusiastic traveler as opposed to the one annual vacation a family may take.
Things to Think About
Be sure that not all your credit cards come with a monthly spending minimum. You never want to be in a situation where you are forced to spend a certain amount monthly if you don’t need to.
Be sure that you weigh the annual fees of all your credit cards against your purchases and rewards. For example, you may be able to waive the annual fee by spending a minimum of S$25,000 a year, such as is the case with the DBS Altitude Credit Card. However, you cannot possibly want this option on all your credit cards.
It is difficult to keep track of paying all your credit card bills before or on the due date. This is especially challenging because each card’s due date is different.
If you are an experienced credit card user, over time you should accumulate a few more cards. Of course, having too many is not ideal, especially if you want to apply for a loan in the near future. Banks see too many credit cards as a risk for a borrower since you have the ability to run up all those cards and go into debt. Overall, having multiple cards is not for the faint of heart. You need to be diligent to pay your bills in full and on time and have self-control not to spend more than you can afford just because you have the credit limit to do so. If you use your credit cards responsibly, your wallet will reward you.