Credit Score: How Does the 30% Rule Work With Multiple Credit Cards?
Having multiple credit cards gives you access to a higher overall credit limit. But it can also make credit utilisation slightly more complicated. Many people follow the commonly mentioned 30% credit utilisation benchmark and assume that staying below it across their cards is all they need to do.
However, when you have more than one credit card, both overall utilisation and utilisation on individual cards can matter. Understanding the difference can help you manage your cards more carefully.
For example, if a credit card has a limit of ₹1 lakh and you have used ₹20,000, your utilisation is 20%.
Generally, lower credit utilisation is viewed more positively when assessing your credit profile. The 30% figure is often used as a common benchmark, but it should not be treated as a fixed legal limit. Crossing 30% in a particular month does not automatically mean that your credit score will fall.
For example, suppose you have three cards:
This gives you a broader picture of how much of your total available credit you are using.
Suppose you have two cards, each with a ₹1 lakh limit. If you use ₹80,000 on one card and nothing on the other, your overall utilisation is 40%. But the first card is itself at 80% utilisation.
This is why it is useful to monitor the balance on each card rather than concentrating most of your spending on one card, particularly if that card has a relatively low credit limit.
A higher ratio in a particular month does not automatically mean that your score will drop. However, consistently high credit utilisation can indicate that you are relying heavily on your available revolving credit. This may affect how your credit profile is viewed.
Therefore, the 30% figure is better understood as a commonly used guideline rather than a strict threshold.
Keep track of both your total outstanding balance and the utilisation of individual cards. Using different cards when appropriate can help prevent one card from getting too close to its limit.
Most importantly, focus on responsible spending and timely repayment. Having multiple cards does not mean you need to use all of them, and a higher combined limit should not become a reason to take on more debt than you can comfortably repay.
Disclaimer: This article is for information purposes only. NewsPoint does not encourage readers to take or use credit cards. Readers should make their own decisions after checking the applicable terms and conditions. NewsPoint will not be responsible for any loss or financial decision based on this information.
However, when you have more than one credit card, both overall utilisation and utilisation on individual cards can matter. Understanding the difference can help you manage your cards more carefully.
What Is Credit Utilisation?
Credit utilisation is the percentage of your available credit that you are currently using.For example, if a credit card has a limit of ₹1 lakh and you have used ₹20,000, your utilisation is 20%.
Generally, lower credit utilisation is viewed more positively when assessing your credit profile. The 30% figure is often used as a common benchmark, but it should not be treated as a fixed legal limit. Crossing 30% in a particular month does not automatically mean that your credit score will fall.
How Is Utilisation Calculated With Multiple Cards?
If you have several credit cards, you can look at your overall credit utilisation by combining the limits and outstanding balances of all your cards.For example, suppose you have three cards:
- Card 1: ₹1 lakh limit, ₹20,000 outstanding
- Card 2: ₹50,000 limit, ₹10,000 outstanding
- Card 3: ₹50,000 limit, ₹5,000 outstanding
This gives you a broader picture of how much of your total available credit you are using.
Why Individual Card Utilisation Also Matters
Looking only at the combined figure may not tell the whole story.Suppose you have two cards, each with a ₹1 lakh limit. If you use ₹80,000 on one card and nothing on the other, your overall utilisation is 40%. But the first card is itself at 80% utilisation.
This is why it is useful to monitor the balance on each card rather than concentrating most of your spending on one card, particularly if that card has a relatively low credit limit.
Does Crossing 30% Affect Your Credit Score?
There is no universal rule that says your credit score will immediately be affected whenever utilisation crosses 30%.A higher ratio in a particular month does not automatically mean that your score will drop. However, consistently high credit utilisation can indicate that you are relying heavily on your available revolving credit. This may affect how your credit profile is viewed.
Therefore, the 30% figure is better understood as a commonly used guideline rather than a strict threshold.
How To Manage Multiple Credit Cards
If you have multiple cards, avoid putting most of your expenses on a single card simply because you have unused limits elsewhere.Keep track of both your total outstanding balance and the utilisation of individual cards. Using different cards when appropriate can help prevent one card from getting too close to its limit.
Most importantly, focus on responsible spending and timely repayment. Having multiple cards does not mean you need to use all of them, and a higher combined limit should not become a reason to take on more debt than you can comfortably repay.
Disclaimer: This article is for information purposes only. NewsPoint does not encourage readers to take or use credit cards. Readers should make their own decisions after checking the applicable terms and conditions. NewsPoint will not be responsible for any loss or financial decision based on this information.
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