Will having multiple credit cards affect my credit score?

Yes, it can positively or negatively impact your score and it depends on several factors like your borrowing history, payment history, and more. Multiple card applications can result in hard inquiries, potentially lowering your credit score, but if you practise responsible use of multiple cards, it can build a robust credit history and by lowering your credit limits for all your credit cards, your lower credit utilisation ratio can improve credit score in the long run.

How Many Credit Cards Should You Have?

Ever since the average credit card consumer in Singapore hit an estimated ownership of 6 credit cards per person almost decade ago (as per statistics from the Monetary Authority of Singapore), there has been a healthy increase in household liabilities including credit card debts up till today.

6 cards may seem too many, especially if you’re a new credit card owner, but it could be the norm for some people. Is 6 cards really too many? Should you own just 1 or 2 credit cards? This serves as a reminder for us to reflect on the question of how many credit cards one should own, weigh the pros and cons and explore better ways to manage credit card debt.

Pros & Cons Of Having Multiple Credit Cards

Pros

Better rewards and cashback by using specific cards for different spending categories
Lower credit utilisation ratio can improve credit score
Having multiple cards provides a backup if one is lost, stolen, or declined
Access to more promotions, discounts, and special offers from various issuers e.g. travel insurance coverage, airport lounge access, concierge services
Combined credit limits provide more borrowing power
Responsible use of multiple cards can build a robust credit history

Cons

Complexity in managing multiple due dates and payments
Multiple cards can mean higher cumulative annual fees
Multiple cards applications can result in hard inquiries, potentially lowering your credit score
More available credit might lead to increased spending and debt
Risk of higher overall interest charges if balances are not paid in full
Increase in the risk of fraudulent activity and identity theft

Tip #1

Pay on time and in full

Credit cards provide convenience and rewards, but carrying a balance incurs interest, which can lead to financial and legal troubles. Late payments can damage your credit score, making it harder to obtain loans in the future. Adopting automation like setting up a GIRO deduction of your card bills every month is one of the ways to avoid late payments. Plus, building a good credit history can help you secure loans more easily later on.

Tip #2

Evaluate your spending

Assessing your spending habits before selecting a credit card holds significance due to the diverse rewards, perks, and attributes each card offers, tailored to different spending preferences. Depending on your lifestyle, prioritising a select few cards and channelling the majority of your expenses through them might prove more advantageous.

Spreading your spending across more than five cards could potentially diminish your rebate earnings, as each card receives less spending. Therefore, by understanding your spending tendencies and requirements, you can choose a credit card that optimises your rewards and advantages, leading to potential savings.

Tip #3

Keep track of the cut-off date

Wisely track your cut-off date to benefit from a few extra weeks on your credit limit. By strategically timing your purchases, your expenses will show up on the next month’s bill, giving you more time to secure the funds, especially for large expenses.

If you aren’t able to manage more than three credit cards, opt for fewer cards with higher credit limits rather than signing up for multiple credit cards. While having multiple cards might give the illusion of more available funds, sticking to one or two cards reduces confusion and helps you pay on time.

Tip #4

Take note of the rewards you value most

Credit cards often offer rewards in the form of cashback, points, or miles for specific spending categories, and lifestyle changes such as working overseas more often or getting married, buying a house and starting a family can mean tapping on different types of credit card perks at different stages of your life.

In addition credit cards often have seasonal promotions and some cards may offer higher rewards for dining, groceries, travel, or online shopping during different times of the year. By knowing where you spend the most, you can pick 2 or more cards that reward you the most in those areas, instead of signing up for cards just for one-off promotions.

Tip #5

Compare and research

After you’ve determined what kind of reward currency you value most and can get most out of your spending habits, you’ll need to compare between the cards which are available in that particular category or categories i.e. cashback, air miles, petrol discounts, dining privileges, etc.

Some credit cards impose spending caps or minimum requirements to earn rewards. Try to estimate whether you're likely to reach these thresholds based on your current spending habits. If your expenses are higher, you might prefer a card or multiple cards with no caps or higher limits.

Tip #6

Avoid taking on your credit cards

Interest is charged from the day you take the cash advance until you repay the full amount, with no grace period unlike regular credit card purchases. Additionally, some credit card companies impose a higher interest rate on cash advances compared to regular credit purchases.

Tip #7

Lower each credit card’s limit

Keeping limits low can not only help curb the temptation to make large, unnecessary purchases, but also help maintain a lower credit utilisation ratio, positively impacting your credit score.

Tip #8

Pick cards with waivable/no or low annual fees

Pick cards with waivable or no or low annual fees

High-value rewards like cashback, travel points, or miles can accumulate significantly over time, providing substantial savings or benefits that surpass the annual fee cost. By selecting cards where the perks clearly outweigh the annual fee, you can enjoy substantial long-term benefits, improved financial rewards, and enhanced overall value from your credit card use.

Frequently Asked Questions

Should I get more than 2 credit cards?: Yes and no. If you are able to wisely track your cut-off date to benefit from a few extra weeks on your credit limit and maximise all the benefits that your cards provide, you should get more than 2 cards. However, if you can’t manage more than three credit cards, opt for fewer cards with higher credit limits rather than signing up for multiple credit cards. While having multiple cards might give the illusion of more available funds, sticking to one or two cards reduces confusion and helps you pay on time.
Will having multiple credit cards affect my credit score?: Yes, it can positively or negatively impact your score and it depends on several factors like your borrowing history, payment history, and more. Multiple card applications can result in hard inquiries, potentially lowering your credit score, but if you practise responsible use of multiple cards, it can build a robust credit history and by lowering your credit limits for all your credit cards, your lower credit utilisation ratio can improve credit score in the long run.