How to Manage Too Many Credit Cards

Recently a friend asked me the following question: “If I have 4 Visa cards, 1 American Express, and 3 Store Cards, is that too much? I am never late and pay off almost all of them. Should I be closing some or just keep them open without using them?” -Jeffery

The Answer
The amount of credit cards you have open do not directly impact your credit score. However, your amount of debt to credit ratio does. For example if you have $10,000 worth of credit and $2,000 worth of debt, then you debt to credit ratio would be 20%. The higher this percentage is, the lower your credit score will be. It is a good rule of thumb to use less than 30% of your line of credit on any single credit card.

In Jeffery’s case, it is important to know how much debt he has in relation to the amount of credit he has open. If he has no debt, then his ratio would be 0% no matter how many credit cards he has opened. This means that he has the option of either leaving the credit card account open or closing them without impacting his credit score. Keep in mind that closing a lot of credit card accounts at the same time is not a good idea, so gradually closing accounts would be recommended.

There is a lot of confusion regarding the amount of credit cards people should have and what they should do if they have too many, because there are so many answers out there. The average American carries about 10 entities of credit, which consist of credit cards, loans, mortgages etc. It is suggested to have around 2-6 credit cards, but remember there isn’t a magical number for how many credit cards are good and how many are bad.

The most important thing to keep track of is your debt to credit ratio. To learn about factors that impact your credit score visit the post about credit score.

If you have questions, I would love to answer them! So leave a comment with your question on this post.