4 Reasons You Should Get A Second Credit Card
If you already have a credit card and have been managing it well by paying off your bill in full every month, getting a second credit card can be beneficial to you.
In theory, the steps to getting a great card and using it advantageously are simple, but doing it can be tough. If you manage to use your card wisely, and are able to clear your balance every month, you are doing a good job, so give yourself a pat on the back — you deserve it!
In Malaysia, Bank Negara Malaysia (BNM) released a new credit card guideline in 2011 stating that cardholders earning RM36,000 per annum and less can only hold credit cards from a maximum of two issuers .
With this limitation, it makes sense to be fussy about your second card if you fall within that income bracket to ensure that it really helps you save and manage your finances better.
If you already have one credit card, here are some reasons why you should get a second one:
1. As a back-up plan
If you often need to purchase big ticket items and manage to always pay your bills on time, it’s good to have another card to extend your credit limit.
Maxing out your credit limit on one card, though for a short period, can be a bad idea in times of emergency. Hence, it is better to have another card as back-up.
It’s a bad idea to rely on only one credit card for all of your spending, especially if you travel. To protect yourself, get your second credit card with a different bank or issuer from the one that gave you the first card. (Our credit card quiz is a great place to start.)
A back-up credit card is a necessity because if your credit card is lost or stolen, and you only have one card, you’ll be left using cash until your new card arrives. That can be a problem if you are overseas.
In this case, having a backup costs you very little.
2. To improve your credit rating
Establishing a good credit score for yourself involves having multiple, long-term credits in your name, and paying them wisely. One must demonstrate responsible behaviour with these credits in order to improve his or her credit score.
Having a good credit score can help you qualify for a home loan, finance a vehicle, or handle other loans down the road. However, getting a second credit card is a relatively minor scoring factor, but it’s still a move in the right direction. A second card will only help your credit score if you have a low credit score at the moment, and you use your second card regularly but pay it off every month.
However, if you max out your card and not pay for it, then it will hurt your credit rating.If you get a second card but don’t use it, it will have little impact on your rating. Having a credit line but not using it is not a good thing. It costs the bank money for you to have an account (which you’ll probably end up paying for even if you don’t use it), and it also shows that you are incapable of using your credit card responsibly.
3. To make the best out of the card features
Different cards have different reward structures. Usually, it is quite hard to find one card that rewards you for all your major spending. For example, by getting a petrol credit card, you can save through cash back or reward points on petrol spending, but usually the cash back for other spending (such as dining) is nothing to shout about.
Therefore, it makes sense to get a second credit card that will fulfil your other spending needs. That way, you can use your petrol card to fuel up at the station, and use your dining card to pay when dining out.
On top of that, credit cards also provide plenty of other benefits like purchase protection, reward points and extended warranties.
If you are usually good at managing your credit card payments, it doesn’t hurt you to get a second one.
4. To manage debt better through balance transfer
For those who do not have a good credit card habit, it is still good to get a second credit card to manage your debt. If you’re trying to reduce your debt, getting a second card with an attractive balance transfer package can help you a significant amount of money.
Many of these cards offer low, introductory interest rates for a set period of time, usually 0% interest for six to 12 months. Moving balances from high-interest cards to low-interest ones saves you a lot in interest and helps you pay debt down faster.
However, avoid making fresh purchases on your balance transfer card, or not paying off your balance transfer within the set 0% period, as the standard interest applies for new purchases and balance after the promotional period.
If you are just allowed two credit cards, make each one counts. It’s no longer just about convenience, but also about outsmarting the system and saving money on your spending. Prudent spending and management of your credit card can bring you a host of rewards, but not being able to do that, can lead you to a financial black hole.