How to Handle Multiple Credit Cards
Many people have more than one credit card in their wallet, for one reason or another. Maybe you have a cash back credit card used specifically to earn rewards – or you had a bunch of credit cards with high interest rates that you later consolidated onto a 0% balance transfer credit card you don’t use for purchases. Whatever the reason for having multiple credit cards, if you’re in get-out-of-debt mode, you may be hurting your credit score by having so many cards, especially if most of them are not being used.
The Problem With Unused Credit Cards
Having multiple credit cards might mean you’re paying multiple fees. You might have annual fees associated with one or more of your credit cards, and you may even get charged an inactivity fee from credit cards that don’t get used for a long period of time. While these fees may seem minor, when you add them up over the course of a year, you may be paying more than you expected.
Accounts Closed for Inactivity
When you have multiple credit cards that aren’t being used, you may also find your cards get closed for inactivity. Closing credit card accounts can have a negative impact on your FICO credit score, because it reduces the amount of available credit you have. When your available credit is reduced, you have a higher percentage of debt in relation to available credit, which is taken into consideration in the calculation of your credit score.
Another problem with a creditor closing a credit card account for inactivity is if it happens to be the credit card account you’ve had the longest. Your FICO score calculation also considers how long you have had a credit history, and the shorter your credit history, the lower your credit score.
Too Many Cards To Handle
If you feel like you can’t keep track of each of your credit cards, and ensure each is being used regularly while still paying the balances off in full each month to avoid interest charges, late fees, and other finance fees – you may need to take a close look at your credit cards to decide which ones you need to keep and which ones you need to close.
Do not close your oldest credit card account, and do not close all of your credit card accounts at the same time or your credit score will take a big hit. Don’t close credit cards if you’re looking to get a loan or other source of financing in the near future, as you will need a little time to rebuild your credit score after closing accounts to get the best interest rate. When deciding which credit card or two to keep open, try to keep your oldest account open and the one with the best interest rate.
