Which Credit Cards should I cancel or keep?

Having too many credit cards can be a bad thing sometimes and can bring your credit score down. Although, you do not want to go crazy calling up your credit card companies and canceling credit card. If you cancel too many credit cards then that is also a bad effect on your credit score because it takes down your debt to credit limit ratio. You want to keep most of your cards open. On the other side, if your wallet is overflowing with plastic cards then your credit score could be at risk but only a small risk.

Americans hold an average of five credit cards according to the American Bankers Association (ABA). Having a bunch of unused cards do not add benefit the holder and can also increase the risk of identity theft. More importantly, home and auto lenders in particular worry if you have cards with large, open lines of credit. Their concern is that you may fill those lines and then have trouble paying your other debts.

So which credit cards should you keep and which should you get rid of? One good strategy is to treat credit cards like you do people. This strategy says to stick with the oldest relationships which are credit cards you have had for long time periods and have paid regularly and promptly. This pattern demonstrates responsibility as well as healthy credit habits to the credit card companies and your credit score.

Cards that you have not used should be closed in some cases but only if you feel you will not use them. Cards you opened to take advantage of a low interest rate should be closed when you are finished with that low APR, especially if there is no good rewards involved and then apply for another card that is similar and transfer the balances to the new card.

Cards we recommend to close immediately:

  • Retail store credit cards with low credit limits – all these cards do is tie up your credit limit for other cards or loans.
  • Gas station credit cards that only work for one brand of gas station – this is waste in your wallet only to give more money to the greedy gas stations and none to you! Try canceling this card and applying for a gas card you can use anywhere
  • 0% APR low interest rate cards where you have paid off the balance or still owe and the offer is over and now charging you a higher interest.  Once you get a new 0% offer cut this card up and cancel.
  • Low credit limit credit cards
  • Any card on your credit report that you do not have – make sure you call and cancel these cards because these could be identity theft waiting to happen.
  • Rewards programs that have lots of fine print that works to their advantage