Reasons to Cut Back on Credit Cards

How many credit cards do you have in your wallet or purse? Zero? Two? Ten?

A few years ago, I discovered that I had over ten open credit card accounts at the age of twenty five. I had two Discover cards, three Citi cards, two MBNA cards (now Bank of America), and three American Express cards (one personal, one business, and one corporate). I had opened more than one credit card a year since eighteen, which is the earliest you can usually get a credit card on your own (minors can't be bound to legally binding contracts on their own), and it was far too many.

They each served a purpose back when I opened them. Several offered 0 percent balance transfer offers that I could arbitrage with a high yield savings account, back when they yielded 5 percent. The corporate credit card was for work and the business one helped organize my business finances. Each had a purpose but several had outlived that purpose.

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I kept them because I saw no harm in having a lot of cards. I was also always told that your FICO credit score is negatively affected if you closed an account. If keeping them didn't hurt and closing them did, I might as well keep them right? Fast forward to today and I now carry three cards (two American Express, one Citi), with one card locked away (my oldest credit card, a Discover card).

Why did I close the other accounts? Simplicity. How do you close accounts while minimizing the damage? On the Citi cards, I consolidated my lines of credit into the oldest of the accounts (which happens to have the best rewards), the card I carry now. The others, I ignored the credit score advice and closed them anyway.

I already purchased a home, I had a car, and I didn't anticipate needing a new loan anytime soon. I figured that as long as I kept my credit utilization low, through consolidation and strategic credit line increases, I'd be OK. Today, my credit card finances are simpler, my credit score barely noticed, and I don't have ten credit cards.

Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.

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