Published in: Credit Cards | April 29, 2019

Too Many Credit Cards? Here's How to Spring Clean Your Wallet

By:  Lyle Daly

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If your wallet is overloaded with credit cards, then it may be time to make a few cuts.

Image source: Getty Images.

Woman lying down sliding credit card into wallet with other cards spread out on her hair.

Image source: Getty Images

For credit card enthusiasts, the most common problem isn't deciding which cards to get. It's deciding which cards to keep.

With all the travel cards, cash-back cards, and store cards available, it's easy to build up a roster of several different cards. But having a lot of credit cards can quickly become a hassle, as it means more accounts to manage and more annual fees.

Whether you have a few credit cards or over a dozen, it's good to give your wallet the occasional dose of spring cleaning. So round up every card you own, and we'll go over exactly how you can figure out which ones to get rid of.

First, decide which cards are untouchable

The smart way to start is by picking out the best credit cards you have -- the ones you 100% want to keep.

These will probably be the cards that you reach for most because they have the highest rewards rates. That said, you may instead elect to keep a card due to other money-saving benefits it offers.

For example, if you have a hotel card that gets you a certificate for a free night every year, then it may be worth holding on to even if you hardly ever pay for anything with it, simply because that perk saves you more money than you pay for the card's annual fee.

Once you know which cards are keepers, here's how you can sort through the rest.

Cancel the newer cards, keep the older ones

An important factor in how your credit score is calculated is your length of credit history. Under the FICO scoring system, this factor makes up 15% of your score.

This means older credit card accounts are good for your score, whereas newer accounts can bring it down. For that reason, it's often a mistake to cancel the cards that you've had the longest. I never use my first credit card anymore, but I still keep it open because of its lengthy history.

It makes sense to cancel newer cards that you don't use much. You may even see a small boost in your credit score by getting rid of those newer accounts.

Say goodbye to unused cards with annual fees

Credit cards with annual fees can be worth keeping if you use them regularly, but if you don't, then you're just throwing money away.

Be realistic about whether you're getting much value from a card's benefits, especially if it's a premium credit card with a hefty annual fee. You shouldn't overpay for a credit card on the off chance it will come in handy one day.

What if you're not using a credit card with an annual fee, but it's a card you've had for a long time? In this situation, your best option is to contact the card issuer and see if you can downgrade it to a no-annual-fee card. This allows you to keep the account open without paying the annual fee anymore.

Credit card companies will usually let you downgrade, as they prefer that over losing a customer. They'll sometimes even refund your most recent annual fee if it was charged within the last month or two.

On the off chance they don't let you downgrade, then you should probably cancel the card. It may make a small dent in your credit score, but that's better than paying a fee every year for a card you don't need.

Don't forget about your credit utilization

Before you start canceling cards, make sure it won't cause your credit utilization to get too high.

Your credit utilization is the ratio of your total credit card balances to your credit limit across all your cards, and it's best to keep this below 20% to 30%. If your utilization gets too high, it can drop your credit score substantially, as this factor makes up 30% of your FICO® Score.

Let's say you have eight credit cards with $5,000 in total balances and a combined credit limit of $20,000. Your credit utilization would be 25%, which is fairly good.

Then you cancel four cards and lose $10,000 in available credit. Your credit utilization would jump to 50% and lower your credit score.

To avoid this, pay down your credit card balances before canceling cards.

Trimming your credit card lineup

To sum it up, you'll want to keep:

  • Cards that you use most often with the highest rewards rates
  • Cards with benefits you use that outweigh any annual fee
  • Cards with a lengthy account history

If a card doesn't fit into any of those categories above, then it's probably time to get rid of it.

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