Dubai: When it comes credit cards, the options are plenty, be it rewards cards, store cards, business cards, or balance transfer cards. But if you do possess more than a couple of cards, you may also agree that keeping track of more than a couple of credit cards can often times be a challenge.
“Although the risk of falling deeper into debt with multiple credit cards is incredibly higher, there are ways to use your credit cards to your advantage, if used adequately, especially when you regularly use more than two of them,” said Essam Kabeelali, an Abu Dhabi-based consumer financial advisor.
Currently there are 2.8 billion credit cards in use worldwide, with the latest available data for 147 countries revealing that 19.28 per cent of the world's population owns a credit card, which translates to roughly one in every five people globally.
“It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit, but some global statistics indicate that among the percentage of population who possess credit cards, the average per person runs up to four cards,” Kabeelali added.
Although the risk of falling deeper into debt with multiple credit cards is incredibly higher, there are ways to use your credit cards to your advantage
How do UAE residents manage multiple credit cards?
Long-time Dubai resident Aditya Srivatsav, 38, currently has three credit cards that he uses, two of them for rewards – one for fuel, one for groceries – and the third one is a card with the lowest credit limit which is used for general purchases.
“I use the card with the least credit limit for general purchases so as to rein myself in from overspending and that is also the card I have used in the past when transferring the credit balance to another card to save on interest,” the data research analyst said.
Another UAE resident, Sanjay Poonen, 54, a spices trader living in Sharjah for the past two decades, has four credit cards of which two are used more frequently than the other two. He uses one of them for travel rewards on account of his recurrent travels and another for general purchases.
“While I use one credit card for travel rewards, my wife and teenage daughter use the other card for general purchases. I have to maintain a list of monthly card and annual fee due dates and enrolling in automatic payments to ensure I don't miss my monthly payments,” Poonen said.
With the other two cards, he said that one card is kept with him as a back-up at all times, while the other one remains with his wife and reserved for emergencies. Poonen added that he makes occasional purchases with the cards and pays the balances in full to ensure they remain active.
How else are you advised to manage with multiple credit cards?
While it's also important to keep a list of when each monthly payment is due since a late payment can mean you'll have to pay interest, also keeping a list of when the annual fee is due will help you keep track of when the fee will hit.
“Keep in mind that with multiple credit cards, you may not want to open new accounts to boost your credit score. How you use the cards matters more than how many you have. So always keep an eye on your balances,” Mirin Raul, a personal finance counsellor based in Dubai.
“Don't use additional credit to make purchases you can't afford. Factor in timing when applying for a new card. If you already signed up for a new card within a short time span, it can be wise to wait before applying for another one. Many applications in a short time can damage your credit score.”
• Don't let any of your cards lie dormant. Using all of your cards once in a while will prevent them from becoming inactive. If a card is closed due to inactivity, your credit utilisation ratio can go up, which in turn may damage your credit score.
Bottom line: Debt control is key when having multiple credit cards
According to Raul, who coaches people on issues with tracking uncontrolled expenses and liabilities, a key mistake among those she comes across is rolling over the credit card debt or delaying your dues and getting charged with an interest of 36 per cent, the highest interest.
“It’s often overlooked that if only the minimum amount is paid on a card, it takes 14-24 years to clear off the outstanding debt, depending on the card limit - a higher limit needs more years to clear,” said Raul. “If you are already rolling over the credit, consider the ‘Debt Stacking’ process.”
‘Debt Stacking’ allows you to make the same total monthly payment each month toward all of your debt and you continue this process until all debts are paid off. Raul reiterated that this works best when you do not accrue any new debts and will help eliminate liability to a large extent in a year.
“Having multiple credit cards is good as long as you keep track of payments due, avoid overspending and maintain a low credit utilisation ratio. However, if you know you have a tendency to run up large balances or find it hard to organise payments, avoid having multiple credit cards,” Kabeelali warned.
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