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Trimming the Fat: Keep Two Credit Cards and Cancel the Rest
Some people have a wallet full of credit cards. And while others may view this as a status symbol and a sign of wealth, it’s more likely that the person is drowning in credit card debt. Credit card companies tempt consumers with low introductory rates, free gifts, and waivers of yearly fees, but having a stack of credit cards is not a great financial strategy. To take control of your spending and debt, consider cancelling most of the cards in your wallet and keeping only two.
Why Two is Enough
The average consumer uses their credit cards to make purchases and take out the occasional cash advance to see them through until payday. Two cards is enough to meet these needs. One card can be used on a regular basis, and the other can be a type of emergency card. Having two cards with decent limits is more than enough to meet your credit needs, or at least it should be. If not, it’s time to re-evaluate your spending habits.
You Can Track Spending More Efficiently
Having a multitude of cards in your wallet means that you might forget which card you used to make a certain purchase, or that you used the card at all. This could result in some big surprises at the end of the month when statements are issued. Secondly, there is a psychological component to having numerous cards. Many consumers who get in over their heads feel shocked when they realize the extent of their credit troubles. Here’s why. Having a small balance on each card, say $500, doesn’t seem like a big deal. Multiply that by ten, though, and that’s a $5,000 debt. Having just two cards will allow you to find out exactly how much you owe, assess your spending habits more accurately, and concentrate on paying off just a couple of balances instead of a dozen.
You Reduce the Chance of Accumulating Out of Control Debt
This may seem obvious, but it’s a compelling reason to keep just two cards in your wallet. Having two cards with relatively low limits means that the total of these limits is the maximum credit card debt you will be able to accrue. As this amount will probably not be astronomical, it will be possible to repay it with a little self-discipline. Eight cards with the same limits, however, gives the consumer the opportunity to rack up huge debts, which will be significantly more difficult to pay off.
Improve Your Credit Score
Whether you’re looking for a good mortgage rate, or approval for a car or bank loan, a good credit score is vital. When your score is being calculated, the number of credit cards you have is often taken into account. Applying for too many credit cards or having too much available credit can lower your score.
Which Ones Should You Keep?
If you’ve decided to cull your credit card collection, making the decision about which ones you want to keep can be difficult. Consider each of the following factors when you are making your decision.
Interest rates: Look at the APR for purchases, balance transfers, and cash advances. Generally, the cards that offer the lowest interest rates should be the ones that you will keep.
History of account: Too many credit cards can adversely affect your credit rating, but a credit history that is not well-established can too. When you’re sorting through your cards, find out how long each of your accounts has been open. All things being equal, you should close more recent accounts first, as accounts that you have had for a longer period of time will help you obtain a higher score.
Rewards: Rewards cards give you the opportunity to obtain rebates or accumulate points that can be used towards travel, gift certificates, and merchandise. You usually need to earn quite a few points for a reward, so using the same rewards card for most purchases is another advantage because you can earn points faster. If you have several rewards cards, base your choice on the desirability of the rewards offered, the number of points you need to earn to receive a reward, and other factors like interest rates and fees.
Yearly fees: Some cards require cardholders to pay a yearly fee just to carry the card. With the large number of no-fee credit cards available, there’s no reason not to rid your wallet of credit cards that require you to pay an annual fee.
Fees: Credit card companies love to charge fees. Cash advance fees, over the limit fees, and late payment fees are some of the more common ones. Look at the terms and conditions for each of your cards, and choose ones that have lower miscellaneous fees.
Grace periods: This is the number of days that can pass between the issuance of your statement and the company’s receipt of payment before fees and penalties will begin to accrue. Choose cards that offer longer grace periods.
You may also consider customer service and whether the card offers perks like store discounts and online account access. By taking the time to thoroughly examine the benefits and drawbacks of each of your cards, you will ensure that you will keep the two that benefit you most. As a result, your wallet, and hopefully your debt load, will be a lot lighter.
About the Author:
Paul Basco Provides Expert opinions and reviews to help you Compare and Apply for a Credit Card Offers online. At GettintingaCreditCard.com, we offer credit cards for bad credit, low apr credit cards, instant approval credit cards and much more.
This article may be reprinted in accordance with the GettingaCreditCard.com Reprint Requirements
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