Hello Readers! 

Hope you all are well and super excited for your new year celebration! Well, you must be. We wish that your new year might be full of great joys and happiness.

Do you have a single bank account or multiple bank account? Well, there is no issue in having multiple bank accounts, in fact, it is beneficial when it comes to ideal financial planning. But if you have credit cards associated with the number of bank accounts you have, then this is a serious problem that you need to resolve for your good finances.

Well, let us understand the whole scenario of credit cards.

Credit card primarily stretches your spending period by giving you roughly 20-50 days of an interest-free loan. Many credit cards also offer reward points and benefits which help you get good deals and even freebies for a number of lifestyle and electronic spends that you seek. Getting a phone or air miles or free stay on your rewards gives you a feeling of joy. But before you own credit cards for the number of the bank account you hold, you must get aware of the difficulties in managing multiple credit cards.

Managing multiple credit cards is more than about reward points. Here is what you need to be careful about.

You End Up Overspending!

Credit cards come with a limit amount that is usually equal to three to four times your monthly spending. If you have multiple credit cards, add all the credit limits, when you will get the total limit amount, you will for sure wonder and will feel like that you can afford a lot more than what you have before the cards entered your finances.

But before you enter that wonderland, let the reality strike your mind. credit cards give you a loan; the credit limit is misleading and often a lot more than what you can afford to spend in the 20-50 day credit period.

So, how are credit cards useful then? These are useful only in case if you spend only as much as you can pay back every month at the end of the 50 day period. Remember, credit cards help you only stretch your money, but they do not help you enhance your affordability for expensive commodities.

Then having more than one really doesn’t add value to your money life, it only adds temptation to spend more.

So, what strategy one must follow while shopping with credit cards? A good strategy one must follow while shopping with credit cards is, they must ensure that on a monthly basis they don’t exceed 20% of their credit limit. And if they are planning for a big spend, they can plan ahead only after ensuring that they will be able to repay it fully at the end of the 50-day credit cycle.

Fees Levied If Fall To Repay On Time!

If one fall to pay the loan amount taken from the credit card on time, definitely he/she is going to pay that extra charge, which includes late fees and interest charges on the credit card. While the late fees are an absolute amount, the interest charge can be as high as 3% a month on the entire bill amount for the month where it is not fully paid.

Can one pay the bill of one credit card with the help of another credit card? Well, having multiple credit cards often gives this false sense of security to repay the balance using your other card or shift your subsequent purchases to another one. However, this cycle lasts only for a short period and ultimately you will have to pay all the bills from your savings.

If late payments start on more than one card, then your fees and interest charges will only go up and cause more trouble. Also, late payments or delayed payments impart their negative impacts on your credit score.

Credits cards are useful only when their usage is limited and controlled. Do not use them excessively and end up messing with your affordability and ability to repay the dues chasing this.

For any kind of query regarding financial planning you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).