I just checked my credit report to make sure everything was hunky dory in 2010 (which it was) and I realized that I have nine credit cards open with a total credit line of $55,900!
I got well over a 10% return in both my 401k and Roth IRA last year, and I would’ve had about $1,300 less money to invest if I paid off this loan. That means I’ve paid 0% to borrow money and got a 10% return on $1,300. I made $130 thanks to having a credit card! A 0% loan is free money. So there!
Getting back to the original point, I have five credit cards that I don’t use and don’t ever plan to use again. I want to do the right thing for my financial situation and credit score, which means I need to consider closing some accounts.
I don’t know exactly how the credit score formula works (nobody except the people at the credit bureaus does), but I do know some things they like to see:
- The longer average account age, the better
- You want a debt to credit ratio of no more than 30%
- They could theoretically punish me for having so much credit because I “might max out all the cards”
I have all of my cards broken out into three categories. I’m definitely keeping the cards I use, and I’m definitely getting rid of two accounts I opened for free money. I’m not sure about the last three.
Cards I Use
American Express Blue Cash: $10,000 – Jan 2005
Citi Forward: $4,200 – Nov 2010
Chase Sapphire: Credit Limit Not Shown (it’s $6,000) – Feb 2010
Best Buy HSBC: $3,800 – Dec 2009 (balance of $1,213 @ 0% APR)
Outta Here
Express: $1,000 – Apr 2008
Kohls: $1,000 – Jun 2010
Thinking About It
Regions Visa: $11,900 – Feb 2007
Citi PremierPass Elite: $10,000 – Oct 2008
Citi Diamond Preferred: $8,000 – Jul 2008
I think I should keep the Regions card (and maybe even make a small purchase on it to make sure they don’t cancel on me) so I can keep my longest account with the highest credit limit open. Then I could close the other two, reduce my credit by about $20,000, and be down to only five cards.
I’m leaning that way, but I’d like some opinions. Do I have too many credit cards? What should I do?
P.S. This is my 100th post! I can’t believe I’ve already done a hundred of these. I probably would have guessed somewhere around 50 if you asked me to put a number on it. Time flies when you’re having fun and making people laugh! I also have 20 videos, which means 1/5th of my posts are videos. Again, very surprising to me.
This post was featured in the Totally Money Blog Carnival at Budgeting in the Fun Stuff
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
I would keep the premierpass elite for one simple reason.
1 Thank you point for every mile flown.
Just imagine, one flight to Costa Rica and you get $50 Cash back (plus you still earn your 4700 frequent flyer miles). In case you are wondering how much a flight to costa rica costs, that is pretty close to 10% cash back.
Also, Sapphire, Blue Cash and Forward are not travel rewards cards so you may want to keep one card that has the world benefits such as rental care insurance, baggage insurance, etc.
I hear Citi is discontinuing the PremierPass Elite though. I guess I’ll just have to see what else they give me.
First, congratulations on your 100th post, Kevin! Here’s how I look at it. If you actively manage your cards, it doesn’t matter how many cards you have. I’m assuming none of those cards have an annual fee.
If you don’t use a card long enough, the card issuer will close it anyway. And since you don’t keep a balance, enjoy your perks!
Unless you close the oldest card, your score will not be hurt by closing. Overall credit limit too plays a part, so you may see your score hit by a small amount, but this, in my understanding is temporary.
That makes sense. Especially now that I’m thinking my Premier Pass Elite could be beneficial for rewards in some cases, I should keep that open. The only one I will definitely never use is the Diamond Preferred. Maybe I should get rid of that one only.
5 cards are good. Don’t close the other accounts though, just let them expire. I think actively closing accounts will have a negative impact on your credit score.
Congratulation on the 100th post!
I have 2. Drove me CRAZY to have more than 2.
That, and my rewards were stacking up better when I just concentrated on one card rather than multiple ones 🙂
1 — personal + rewards
2 — business. But i rarely use it, if ever. only to rent a car 😛
Congratulations on your 100th post, Kevin! It’s inspirational to see that it is possible to use credit cards to your benefit.
I wouldn’t worry about it.
Hubby and I also have something like 6-10 open accounts and credit lines, but we only use the Discover More (5% cash back on rotating categories), PenFed Visa (5% cash back on gas, 2% on groceries, and 1% on everything else with no minimum needed), and the CitiForward Visa (4% points credit for gift cards on entertainment and restaurants).
Holy shitake! You have NINE cards open! I’m impressed your total credit line is $55K!
That should mean you earn at least $150K right? B/c that would be irresponsible for lenders to give one much more than 1/3rd their total income in credit!
Nice header btw!
Wow, you are doing pretty well! I’m still just starting out with credit and my total credit limit is only $2,400 after 9 months of working on it. I have three cards. I think that just having one would be far easier to keep track of, so I’ve started divvying up what goes on each card to help me use each of them.