It is hard to say exactly how many credit cards are too many to own. In reality, if you can handle and effectively manage many cards, then chances are you do not have too many. However, if you get in trouble with one credit card, one may be too many. Therefore, whether you have too many credit cards is more a question of how you deal with credit.
Use the FREE credit card finder now to find the ideal new card for you!
Too many credit cards may actually pose a credit problem for you. If you have too much available credit for your income level, you are at risk of being turned down for further loans like mortgages and car loans. For this reason, it is important to evaluate the number of cards you own.
What is more important than the actual number credit cards is the amount of credit card debt to income ratio that you could achieve. Some lenders look at this before extending you more credit. Essentially if you would hit a ratio of more than 37% if were to max out your credit cards, you probably have too many credit cards.
As you can see, there is no magic number for too many credit cards. It is all a combination of how you use your credit cards and how much damage you could do with your credit cards. However, if you conclude that you actually do have too many cards, the next thing you will want to do is close some of them in order to get it under control.
Deciding Which Cards to Cancel
In order to decide which credit cards to cancel, be sure to think carefully about your decision. Closing credit cards will affect your credit score in a negative way, at least temporarily. Therefore, it is important to carefully choose the best ones to keep and the best ones to close.
Your credit score is made up of a variety of factors. One of these is the length of time you have had credit. Therefore, it is very important not to close the credit card that has the longest history of use. Doing so would negatively impact your credit score much more so than the closing of another card.
Next, consider the terms and conditions of each credit card. If some credit cards have significantly more interest and more fees, they are a good choice to close. You should always opt to keep credit cards that cost you nothing to carry.
Store credit cards are another type of credit card to seriously consider closing. The problem with such credit cards is that they offer no flexibility and cost a lot to use. They typically have extremely high interest rates and fees. Because you are limited to using them with just one merchant, they are unlikely to be useful in an emergency and are probably doing little more than increasing your debt to income ratio.
Before Closing Credit Cards
If you are closing credit cards because you have too many, it is important to know how to effectively close them without drastically affecting your credit score. Be sure to close your credit cards one at a time. By closing multiple credit cards at once, your credit score will suffer a much bigger hit than if you close one at a time, spread out over a longer period. To learn more about your finances, visit MyMoney.gov.
Not only is the ratio of available credit to income an important one to consider before closing credit cards, your credit utilization ratio is also extremely important to take into account. Be sure that you do not use more than 30% of your available credit. When closing credit cards, you should do the credit utilization calculations with and without the next card you plan to close. You may need to delay closing it until you have paid off more of your debt.
Monitor your credit score as you close credit cards by going to the websites of one of the leading credit reporting bureaus. These are Experian, TransUnion and Equifax.
Deciding to Get a New Card
There are times when you may simply want a new credit card because it offers much better terms than anything you currently have in your wallet or the rewards program is one that greatly appeals to you. You may even want to get one in order to do balance transfers in order to pay off debt.
In reality, there are lots of great reasons to get a new, more suitable credit card even if you have too many already. Just be sure you have chosen the credit card that is best suited to you.
Put the FREE credit card chaser to work now chasing down the best credit card for you!