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I am currently having two life time free credit cards. These cards do not charge any annual fees. And another bank is offering me such credit card. I was thinking if I should go for it as

  • its rare to get truly life time free credit cards.
  • Many credit cards advertise free, but they are actually free only for first year with fees getting waived after some fixed amount of transactions after first year
  • I am not heavy user of credit cards, but definitely moderate user. So with life time free cards, I dont have to worry about whether required amount of transaction is done or not in order to get credit card fees waived (I am not yet paying bills for say electricity, home etc since I am still bachelor and still living with parents)
  • I am getting these due to my current job which is from reputed company. If I switch my company, I may no longer get such offers
  • I will get chance to use offers on different credit cards that are available on different e commerce sites

However I dont know exact rule of thumb of good or bad credit card practice. Honestly I feel its ok to have as many number of credit cards as possible as long as you can manage them. For me it involves automatic credit card payment enabled. So I always use one fixed card as my primary and rest of them only when there is any e commerce offer on that particular card and I have something in my wishlist. So I always pay credit card dues within time.

Is my strategy correct? Especially because I read certain online articles saying things like high number of credit cards reduce your credit score etc?

Ok I forgot to add some of my personal financial facts as requested in comments.

  • I live in India
  • I have zero debts
  • I have one credit card which I use as primary credit card. Since I do most of my transactions on this card, I get annual fees waived.
  • I have two more life time free credit cards.
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The following is based on my Experian credit scoring feedback and experience here in the UK over many years. (And for further information I currently hold a credit score of 999, the highest possible, with 6 credit cards.)

Now I'm assuming that while there may be some differences in particulars in your case due to the difference in locality nevertheless the below should hopefully provide some broad guidelines and reasonable conclusion in your situation:

  1. Having a large number of active credit accounts may be seen as a negative. However having a large number of settled accounts should on the contrary have a positive effect on your score. As you keep your accounts mostly settled, I think having another card will not be to your detriment and should in time be beneficial.

  2. A large total credit balance outstanding may count against you. (But see the next point.)

  3. Having your total outstanding debt on all credit accounts be a smaller proportion of your total available credit, counts in your favour. This means having more cards for the same amount of credit in use, is net-net in your favour. It also has the effect of making even larger outstanding credit balances (as in point 2) to be a lower percentage of your total available credit, and consequently will indicate lower risk to lenders.

  4. It appears from my experience the higher the highest credit limit on a single card you are issued (and are managing responsibly e.g. either paid off or used responsibly) the better.

  5. Needless to say, any late payments count against you. The best thing to do then is to set up a direct debit for the minimum amount to be paid like clockwork every month. Lenders really like consistent payers. :)

  6. New credit accounts initially will count against you for a while. But as the accounts age and are managed responsibly or settled they will eventually count in your favour and increase your score.

  7. Making many credit applications in a short space of time may count against you as you may be seen to be credit reliant.

Conclusion: On balance I would say get the other card. Your credit score might be slightly lower for a couple of months but eventually it will be to your benefit as per the above.

Having another card also means more flexibility and more more options if you do end up with a credit balance that you want to finance and pay off over a period as cheaply as possible.

In the UK the credit card companies are falling over themselves trying to offer one "interest free" or 0% "balance transfer" offers. Of course they're not truly 0% since you typically have to pay a "transfer fee" of a couple of percent. Still, this can be quite cheap credit, much much cheaper than the headline APR rates actually associated with the cards. The catch is that any additional spending on such cards are paid off first (and attract interest at the normal rate until paid off). Usually also if you miss a payment the interest rate reverts to the normal rate. But these pitfalls are easily avoided (pay by direct debit and don't use card you've got a special deal on for day to day expenses.)

So, having more cards available is then very useful because you then have choice. You can roll expensive debts to the cheapest lender at your disposal for as long as they'll offer, and then simply not use that card for any purchases (while paying off the balance as cheaply as possible), meanwhile using another card for day to day expenses.

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Do you need it? It doesn't sound like it - you seem to be able to manage with just the cards you have. Will it hurt anything? Probably not either, unless it entices you to spend more than you make. Another downside might be that you would spend more than you normally would just to have activity on every card.

So all in all, I don't see much upside.

  • What if I have very strict discipline on my spending? (That is by not assuming I will get enticed to spend more. I only use one of them as primary and that too never went above 80% of its credit limit.) – anir Oct 1 '17 at 12:51
  • @anir Okay, so what does it buy you? I'm not familiar with credit ratings in India but in the US it wouldn't help your credit rating much (compared to paying your bills on time). It sounds like it may be more for prestige than a sound financial decision. – D Stanley Oct 2 '17 at 13:18
  • Credit ratings in India do matter especially taking some loan say for example home loan and I wanted to have another card for two reasons: (1) many times I find some e commerce site have offers on some card which I dont have (2) convenience just in case if I fall short of money (which did never occurred till now) – anir Oct 2 '17 at 20:14
  • @anir I realize that credit ratings matter - what I don't know is if having three cards that you pay off every month is significantly better than having two cards that you pay every month. In the US your payment history is a bigger factor than utilization/number of accounts. In fact adding a card just to decrease utilization actually hurts for a short time. – D Stanley Oct 2 '17 at 20:46
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Having multiple credit card these days is just for the youth population who shop online & get few reward or discount when they use a particular banks credit card. That being said, I hold 3 credit cards but look at the usage below :

1) One banks card I use for utility bills & Fuel. ( I get a good 5% & 2.5% cashback respectively for using them). Saves me some money.

2) The other banks card are a pure rewards card which i use for shopping.

3) Searching for one more free card which will give me lounge access.

I feel 3-4 cards won't hurt you much but rather increase your CIBIL score as your credit limit is increased & usage is kept in check.

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