Carrying too many credit cards in your wallet or purse may actually be causing your debt problem. Multiple credit cards will result in several debt bills which you will have to pay at the end of the month. If your income is not sufficient, these debts will seriously strain your finances. You may even decide to avoid paying the debts and this will impact your credit score. Please be aware that when you close your credit cards, it will affect your credit score for some time. So please be aware when closing down accounts.
So why is maintaining the number of your credit cards so important? Well, it carries quite a number of advantages.
Makes Life Simple
The best benefit of limited number of credit cards is that you make your life easier. Dealing with over 8-10 credit cards is a nightmare. You have to juggle through credit card bills, keep track of various interest rates, ensure you are getting benefits and make certain that you are getting the best credit card deal. You don’t waste time flipping through your wallet or purse wondering which credit card should be used, which credit card is under-utilised, which credit card is nearing its limit, etc.
Limited number of credit cards means that now you can easily keep track of purchases and how much you owe credit agencies.
Better Manage your Finances
How many times have you skipped a night’s sleep to go through the dozen credit card bills that you have? How many times have you struggled trying to identify various credit purchases and ensuring that the credit agency is not over-charging you? You have to put in a lot of time, energy and effort into keeping your finances in order. Budgeting your income becomes even more important because you need to free up money to pay all the credit bills in time. This can be quite challenging if you don’t have a lot of income to go around.
Debt to Credit Ratio
Ultimately carrying too many credit cards means that your total debt is large. The higher your debt to the credit ratio, less appealing you will look to a potential lender. Hence, your loan or credit application could be rejected because of your debt to credit ratio.
Credit Score Effect
Having many credit cards will actually give your credit score a boost, only if you are able to manage your debt well. However, if you are not able to manage your debt well and are not able to pay it on time, too many credit cards will have a negative effect.
Hence, limited credit cards means that you can better manage your debt and since you can better manage your debt, it will have positive effects on your credit score in the long run.
What should You Do?
Armed with this information, what should you do? Do you close your old credit card accounts, throw away those extra credit cards and limit yourself to two credit cards? You will be able to better manage your finance, improve your credit score and increase your savings.
However, it is not that simple. It all depends on your situation. Credit score, the debt amount you are under, the income you receive and more, all play a deciding factor in what you should do.
A professional debt consultant will be able to best advice you on what should be done and whether reducing your credit cards is actually beneficial.
