I Have Too Many Credit Cards. What Can I Do?

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Besides the obvious fact that there are only so many credit cards you can squeeze into your wallet, there are times when you might consider paring down or simplifying the credit cards you carry.

Before You Close a Card…

Before you start cutting up cards and calling issuers to close your accounts, there are some consequences you should consider. Specifically, closing a bunch of credit cards — even if you have a good reason to — can hurt your credit and potentially make it more difficult to open new cards down the road.

When you close a credit card, you directly impact your credit scores in three ways: You reduce your overall credit limit on your revolving accounts, impact the age of your credit history and potentially hurt your mix of accounts, too. You can see where your credit scores currently stand by seeing two of your credit scores for free on Credit.com.

Whether you’re facing a tight financial time and need to cut back or have just realized that you’re not managing your credit cards smartly, each problem that might make you want to close a credit card has some alternate solutions as well. Here are some of the common problems that prompt consumers to close credit cards and how to make the right choice for your money and credit.

Problem #1: I’m Spending More on Credit Cards Than I Can Pay Back

If you find yourself unable to pay off your credit cards in full every month and are quickly seeing a pattern that’s making you worry about a major credit card debt problem, you might be thinking that cutting up your cards is the best move. And it very well could be. But closing the cards doesn’t erase the debt you currently carry on those cards — it just prevents you from adding to those balances. You may want to consider some classic get-out-of-debt options like a personal loan to consolidate debt (counterintuitive, I know) or opening a balance transfer credit card to get some 0% interest breathing room while you make a plan to pay off your debt and, more importantly, avoid getting back into credit card debt.

Problem #2: I Have Too Many Credit Cards With Annual Fees

Carrying six or seven credit cards in your wallet and not using them is costing you nothing — unless some of those cards have annual fees. Then, it could be costing you hundreds of dollars a year. You could close the cards, but you also may be able to work with the issuers to get some of your annual fees waived temporarily. Or, potentially, you could ask to move to a no-annual-fee option of the same card. That option may not be available from every issuer, but it’s worth a phone call to customer service to explore your options.

Problem #3: I’m Missing Payments Because I Can’t Keep All My Credit Cards Straight

Payment history is the most important factor in your credit scores, and recovering from a negative hit like a missed payment can take years, though there are things you can do to improve your credit score in the meantime.

If you’re missing payments or paying late purely because you have too many credit cards to keep organized, you have a great reason to consider closing accounts. One thing you might consider first, though, is setting up payment alerts. Most of the major credit card issuers have account alert settings that will email or text you reminders of your payment due date. These issuer reminders, or even setting calendar reminders for yourself on your smartphone, could be a great way to tackle the problem without closing a card.

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5 Credit Mistakes You’ll Regret Immediately

credit mistakes

We all make mistakes and have regrets — those extra pieces of pie over Thanksgiving come to mind! — however, some regrets last longer than others. Credit mistakes can make you regret the error of your ways for years to come. Avoid these common credit mistakes and you’ll have one less area of regret in your life. Plus, you can start 2016 with a fresh start for your finances.

1. Opening a New Account Before Closing on Your Mortgage

One of the most common mistakes new home loan borrowers make with their credit is loading up their revolving credit accounts or opening new ones to buy “stuff” for the house once their loan has been approved but not closed. What many borrowers don’t know is that just before closing the loan, many lenders will run a new credit report, and having new debt could throw off your debt-to-income ratio, rendering you ineligible for the mortgage. A new account and credit inquiry can also lower your credit score.

2. Paying a Bill More Than 30 Days Late

Paying your bills late is one of the most common, and preventable, ways to lower your credit score. We’ve all been in a cash crunch or just plain forgot, but when it comes down to it, paying bills late is likely a lack of organization or planning. If you regularly pay bills late, think about why that is — is it poor cash flow planning or procrastination? Use technology to automatically pay bills online and on time. Plan your cash flow better using online budgeting tools or good old-fashioned pencil and paper. Whatever it takes, make sure you pay on time, every time.

3. Ignoring a Collection Letter

Many of us, when faced with a collection letter, like to ignore it. It sometimes feels stressful, especially if you feel you cannot pay it. Please make sure you open a collection letter right away. Even if you can’t pay it immediately, it gives you the information you need to verify the debt is real and who to contact if and when you can pay the bill.

4. Closing an Account

It’s a great idea to reduce your debt load, but when you pay off a card, leaving the account open is key to keeping a good credit score. Closing the account could ding your credit because it lowers your total credit available, thereby increasing your percentage of credit in use and dropping your score. There are a few exceptions to this rule, like if your credit card has an annual fee that is no longer worth it. (There are plenty of no-annual-fee credit card options out there for you.)

5. Maxing Out Your Credit Card

Maxing out your credit cards can leave you with so many regrets. First, having maxed out cards usually signals a cash flow and spending problem, which needs to be addressed first. Second, remember that with higher balances become bigger payments, which can strain already tight budgets. Finally, using more than 30% of your available credit will decrease your credit score.

If you’ve made these mistakes in the past, their effects can take some time to fade. However, the more time between you and your mistakes, the higher your credit score will be, so start today to make better decisions — and live a life without regrets. You can see where your credit scores stand for free every month on Credit.com.

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