Do you already have a credit card and are planning to apply for a second one? Most financial planners and people, in general, will advise you against owning multiple credit cards given the fear of falling into a debt trap or having to pay high interest rates. However, with judicious use and financial self-control, you can not only own two or more credit cards without any financial hiccups but can find several ways to use them to your advantage.

Here’s how…

Improving your credit score

Contrary to popular belief, two or more credit cards can actually help improve your overall credit score due to a lower credit utilization ratio. Let’s explain this. Your credit utilization is the percentage of your available credit limit that you’re using at any point of time. This is taken into account while calculating your credit score, i.e. if the credit utilization is lower, your credit score will be higher.

So, if you use 70% of the credit limit on one card and just 30% of the limit on another card, your overall credit utilization ratio will remain lower compared to a scenario where you only held one credit card and used up 70% of its credit limit. This is because having two credit cards will increase your total available credit limit, and consequently lower the percentage of the limit that’s being used up. This way, you can generally maintain a healthy credit score and boost your creditworthiness.  

Getting the best deals on different cards

Credit card companies offer a host of reward programs – Cash back, air miles, reward points and such. Not just that, card providers also tie up with multiple retailers to offer customers additional perks such as discounts on movie tickets, dining out, golf, valet parking and much more.

Each credit card comes with its own set of benefits – While one may offer great discounts on retail shopping, the other may be good for booking flight tickets. With multiple credit cards, you will have the option of availing multiple benefits and making the most of your purchases, thereby saving a good chunk of money. For instance, you can use the credit that offers great air miles to book tickets for your next vacation while you can use the card that offers cash back deals for everyday shopping.

Transferring existing balance to a new card

These days, most credit card companies allow customers to transfer any unpaid balance on their existing credit card on to a new card with lucrative introductory promotions such as zero or lower-than-usual interest rates. This can help you save a decent amount of money since you can settle your dues in the interest-free period without worrying about high interest rates multiplying your outstanding balance.

Moreover, even after the first few months, the interest rate could be lower compared to your existing card which can lead to further savings. However, you must remember not to make this a habit since transferring balance frequently puts you at risk of falling into a debt trap.

[Related: Credit Card Debt? Balance Transfer Could Be The Answer]

Having a back-up option for emergencies

What if your only credit card gets lost, stolen or compromised in any way? Technology is unpredictable too and you may encounter a situation wherein your only credit card stops working or gets rejected at a particular PoS due to a broken chip or a technical problem with the credit card issuer. You may even run into a situation where your card is maxed out and you are unable to make an important purchase. In such situations, having a second back-up credit card can come in handy.

But beware…

While multiple credit cards come with their own set of advantages, you must ensure that you pay your dues on time diligently and not end up overspending. Otherwise, you may find yourself dealing with a major debt pile-up that can throw your financial life out of gear.

[Related: 5 Ways to avoid overspending on your credit card]