Is it possible to have too many credit cards? Having a large amount of credit cards isn’t always a bad thing. If maintained well, having tons of credit cards can be beneficial to your credit score. When it comes to your credit score, it’s all about managing your credit cards correctly. If you are unable to keep track of your balance, then chances are you might have too many cards to handle.
When the credit bureaus factor your credit score, they will take a look at your credit utilization. What this means is they look at how much borrowing ability you have and how much you are actually using. For Example: If you have a combined credit limit of $50,000 and you’re only using $5,000 your utilization is 10% which is great! Now lets say you close most of those cards and your credit limit drops to $10,000. Your utilization ratio just went from 10% to 50% and your score probably took a nosedive. Not everyone can manage this much credit in good fashion. Here’s 5 signs your credit cards may be getting out of hand:
1. Can’t Remember Which Cards are Which?
I’m sure you’ve seen it before or maybe it’s happened to you. You’re at the outlets purchasing next season’s wardrobe when your card gets declined. You think to yourself “Oh that’s the “bad” card, let’s try this one. I think this one has some credit on it.” Sound familiar? If you said yes then this is a sign you may be spending beyond your means. Always try to keep track of which cards carry what balance. Doing so will allow you to better maintain your accounts and let you focus more on paying down that “bad card.”
2. Opening New Cards because the Old Ones are Maxed Out
Probably the biggest red flag to having too many credit cards. If all of your cards are maxed out, the last thing you need is another credit card to add to you maxed out list. Adding a new card to your already monstrous debt will only cause more problems. Adjust your budget and attempt to be more frugal with your spending money. Try to focus on paying the maxed out cards off. If possible apply for 0% balance transfer cards to help pay accounts off. 0% balance transfer cards will allow you to pay off your balance with no interest for a set amount of time. You’d be surprised how quickly you can pay down accounts when not paying interest.
3. Getting Denied for Additional Credit Cards
If you already have a decent amount of credit cards and you’re getting denied new credit, chances are you have too many cards in derogatory standing. There are a few reasons why you would get denied new credit. As stated previously, your cards may be maxed out and therefore the creditor assumes you aren’t capable of taking on new debt. Another reason may be that you have too many late payments on your report and the creditor doesn’t believe you will pay on time. Remember, late payments can remain on your credit for up to 7 years, even after current or satisfied.
4. Those Damned Late Fees!
Late fees are always a pain in the rear end and getting hit with them every month is a good indicator you have too many cards. Even if you are capable of paying on time, some cards might slip through the cracks simply because you forgot about them. Late fees cost you money and if 30 days past due, will destroy your credit score.
5. That Mountain of Unused Credit Cards
Closing old credit cards can hurt your credit score, this goes back to the credit utilization we talked about in reason 1. That being said, if you are already using a bunch of cards and have a plethora of old cards just taking up space in your wallet, you probably have too many cards. If these old, unused cards still carry balances on them, make your best effort to pay them off. After these accounts are paid you can close them to help manage your debt. Just be aware, if the accounts your looking to close make up the majority of your credit limit, your score will suffer. Of course if you are not struggling to pay off accounts and you have a good credit utilization ratio, then you may want to leave them open until they go inactive. As long as you make payments on time and keep a low credit utilization ratio, you will see a positive reflection in your credit score.
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