I Have A Wallet Full Of Credit Cards – Which Ones Should I Keep?

I often get notes from people who have a small mountain of credit cards. They’re trying to figure out which ones they should keep and which ones they should cancel for various reasons, and they’re (rightfully) concerned with their credit report when they do this.

Obviously, a wallet full of credit cards can be a problem: you have many more opportunities for identity theft and, often, with so many credit cards, your total line of credit may be high enough that it’s actually hurting your credit report. This doesn’t even cover the more aesthetic issues: extra paper management, an unreasonably fat wallet, etc.

So, if you have a mountain of cards, what should you do to trim them down? Here’s my recommendation for anyone dealing with a big pile of the cards.

First, identify one to be your primary spending card. There is no universal “best card” for everyone. You should look at your spending very carefully and choose one that best matches your habits. For us, we use the Citi Driver’s Edge card because we both commute for work and we earn a penny per mile driven in the form of a rebate on our next car purchase. It works well for us, but not necessarily as well for others. I actually have a second primary use card – we keep an Amazon card because we do a lot of our shopping there and it nets us 3% back on all purchases there, so we use the Amazon card exclusively for Amazon and the Driver’s Edge card for everything else.

Next, determine which card you’ve had for the longest period of time. Which is your oldest card? That card is the one that has the longest credit history, which is important for your credit report. For me, my oldest card is one that I got as a freshman in college. It has an atrocious “bonus” program associated to it (1/4% return in the form of “points”), but it was the first one I had and thus it’s been on my credit report for more than a decade, establishing that I’ve had positive credit for a long while.

Also, stop carrying this big, fat wallet full of cards with you. I only carry my two primary use cards with me. My oldest card is in my safe. All of the other cards I’ve ever had have been cancelled. This means my wallet is pretty thin, as I basically carry just a very small number of club and buyer rewards cards (library, Sam’s Club, Borders, Best Buy, etc.).

Then, start zero-balancing and cancelling all of your other cards over time. You can pretty safely cancel all of the rest of your cards that already have a zero balance. With the others, stop using them and start paying them off, making minimum payments on all of them and extra payments on whichever one charges the highest interest rate. When that one’s done, cancel it and start making extra payments on the next one and so on until they’re all gone, then cancel them.

What you’ll end up with is a much thinner wallet and a credit report in very healthy shape. The length of your credit history will remain unchanged and the ratio of your credit limit to your income will actually be in better shape than before.

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  1. Laura says:

    Another benefit is that you reduce losing a credit card,have someone find it and abuse it. You’ll know right away if you are missing something.

  2. !wanda says:

    I had a discussionrs ago, with a friend, and he was confused about the “keep the credit card you’ve had the longest” advice. When you cancel a credit card, it stills appear on your credit report, so anyone checking your credit will know about it, including when I opened it. I canceled a card two years ago and it’s still on my report.
    Will that information ever go away, like bankruptcies do? Or is the information for the canceled card not factored into the numerical credit score, even though the account is still on the credit report?

  3. Madd Hatter says:

    ….
    !wanda: Nobody’s 100% sure how long closed accounts stay on your report, and FICO’s not telling. The crowd over at fatwallet believes they stay for around 7 years.

  4. Kacie says:

    I have a few cards that I keep in a save place at home. For example, a Macy’s card, a credit card for travel purchases, etc. None of those cards have balances on them, and I don’t use them except for when I decide to go to Macy’s and the sort.

    I didn’t realize that you could cancel a card and it would still show up on your credit rating.

    Perhaps I should cancel those cards and keep one or two open.

  5. Ess says:

    This is really good advice, especially the part about not carrying a wallet full of credit cards around.

    I am not sure that you are entirely right about an extremely high amount of credit available hurting your credit score. I have always heard that it is your unsecured debt ratio, not the total credit limit available, that affects your credit score. This makes sense to me, because otherwise, the credit scoring model would be unfairly skewed against people with higher spending capacity since the credit report does not factor in income. For example, a person with a high income who had a 50,000 credit card that they used responsibly would be punished compared to a person with a lower income who had a $1,000 credit limit.

    You are right that a high credit limit *could* hurt your ability to get a loan, though, because you could potentially accumulate a lot of debt quickly, which would raise the lender’s risk.

  6. Victor V. says:

    I don’t have time right now to read the whole article, but as far as I’ve read on other sides the best is having only annualfeeless-reward cards.

  7. I have over 10 credit cards…but I only keep 3 in my wallet. I use them all for different types of purchases to maximize cash back + rewards.

    Too many cards on your person is a recipe for disaster. You might have one fall out by accident and not even notice it!
    -Raymond

  8. lulugal11 says:

    I only carry one card around with me. That is a cash back card with no annual fee. My oldest card is still open because I have a balance on it and it is my card with the highest limit as well.

    I no longer use it but I am paying off the balance on it. My wallet is very thin because of only carrying one card and I only have one set of statements to track.

    This is some good advice and I also heard that once you close an account it stays on your credit report for 7 years AFTER the closing date. I got a credit report from some agency (don’t remember which one now) that did give a listing showing the date I closed some old cards and the date they would remain on my credit report for.

    All of the dates were accurate to within 5 months of the 7 years so I think this is the correct time. They drop off the report from the reported date of closing. Now this varies from card to card because I have one card that says it will drop off in October 2010 on Transunion, December 2010 on Equifax and January 2011 on Experian. The card was closed in August 2003. So while it averages about 7 years since it was actually closed, the date reported closed to each agency was different.

  9. Rev says:

    I agree 100%. I own 3 cards currently. One is the first card I ever got that has no annual fee which sits locked away. Then I carry 2, my Amex and my Amazon Visa incase places don’t take my Amex. I also don’t carry a debit card, I keep $100 in cash tucked away in my wallet for a cash only transaction.

    I feel it minimizes risk for me. If my wallet gets lost I am out $100. Its a good system if you pay off your cards in full.

  10. natasha says:

    Ess-
    As far as I understand, it’s more about how high your credit limit is compared to factors such as your yearly salary and how much you actually use the card. The people who affected by this are generally the people who are spending more on credit than they could reasonably pay off.

  11. Madd Hatter says:

    You’re right Ess. Having high available CL in itself doesn’t lower your score and won’t hurt you. It’s the UTILIZATION of that limit that matters, and so leaving CL open can help if it brings your utilization % down. An individual lender MIGHT get antsy about # of open accounts/overall credit, but in that case you can take the appropriate action when faced with it.

    I never cancel a card unless I’m consolidating the limit into another one for 0% purposes. Then again, I’m responsible with these TOOLS. Yes Kevin, they are TOOLS, not the devil incarnate. If “none of them” is the correct answer, I’d be giving up about $8500 in free money I’ll be making off of them this year. No thanks.

  12. Johanna says:

    For those who are wondering: I applied for and immediately cancelled a credit card my freshman year of college. (Hey, I wanted the free T-shirt…) That was 12 years ago, and it’s still on my credit report.

  13. Jason says:

    I work for a place that uses credit reports daily in accessing loan qualifications. When you apply for a credit card it goes on your credit report, even if you don’t activate it. Furthermore, when you cancel a card it will effect your score and most likley bring it down. When you cancel a card you decrease the amount of credit that is available to you, which may seem like a good thing, but if you have a zero-balance on the card and an open line (even if you cut up the card) it will help you. My advice…don’t close the account but instead cut up the card, lock it up, or use some other means to not use it. Just keep the line open.

  14. Jason says:

    I forgot one other thing…it is not the total line amount that debtors look at to determine your debt-to-income ratio. It is, instead, the balance on the card and thus the minimum payments associated with that balance.

  15. jtimberman says:

    Ugh.

    Credit rating / FICO Score == I love debt score. Yes, I understand that many companies are now using the FICO score for other purposes than for determining “credit-worthiness” to loan money, like insurance companies.

    Request that those companies do manual underwriting of your policy or whatever, or you’ll take your business elsewhere. I’ve heard that some employers are starting to use FICO scores for employment. I’d say make them prove how that makes someone a better employee, but then, I’d rather just not work for such a moronic company.

  16. I love my debt score says:

    @Jtimberman

    These days you need a credit score to turn on the electricity (I had it done today). Like it or not, it’s reality.

    90% of major corporations are going to issue you a company credit card for business expenses. Like it or not, it’s reality.

    I could go on and on. But the point is, adopting an extremist Dave Ramsey philosophy isn’t going to do you or I any good. Chances are, the “moronic company” thinks that you are, well, a moron (*prepare for the inevitable, “if broke people think you’re dumb, than you must be doing something right!”). But here’s a newsflash for you, most “moronic companies” aren’t broke. Why? Because they evaluate risks (e.g. your credit score).

    The bottom line is that if you aren’t responsible enough to spend less than you earn and control yourself with a credit card, you’ll never get anywhere financially. Whether you want to call it “I love debt score” or “FICO”, it is a reflection of responsibility and it’s not going away. Don’t fight the system; use it to your advantage like Madd Hatter (see comment above) and make an extra $8500 a year (*prepare for the inevitable, “if you play with snakes, you’re going to get bitten!”).

  17. Michael says:

    Jason is right about available credit — the higher the better. Instead of canceling your cards, you should just cut them up and never charge on them again. Your FICO score will not get hurt, and you won’t be tempted to overspend.

  18. vh says:

    Speaking of the credit card in the safe, I’ve heard that if you don’t use a card once in a while, the issuer will unilaterally close the account. Is that true?

  19. The problem Frugal Bachelor sees with canceling all but the oldest cards is that his oldest cards don’t have any rewards – they were the most basic cards he got during college and are basically worthless compared to modern cards. He’s in the habit of getting about 2-3 new cards per year, and he mainly decides on them for the rewards. He sees no compelling reason to cancel old cards unless they have annual fee. His credit score is just under 800, and if someone wants to deny him credit because he has too much credit, he probably wouldn’t want to deal with that lender anyways.

  20. Margaret says:

    Some cards will charge you a fee if you haven’t used them in a certain amount of time (say 6 months or a year). If you are keeping an ununsed card open, read your agreement to make sure they don’t do that. If they do, and you still want the card, make a small purchase on it every few months.

    And yes, a credit card company can cancel your credit priviledges, just as they can unilaterally reduce your credit limit or increase your interest rate. You don’t even own the actual card — read your agreement.

  21. Kevin says:

    A simple way to make sure you keep the cards out of your wallet: get a small wallet.

    I bought an “ALL-ETT billfold” about 2 years ago, and I love it. It holds a maximum of 10 cards (of which one is a credit card, and one is an ATM card) along with some cash. I hate “George Costanza” wallets.

    I think I have the “European”. It’s been a while.

    http://all-ett.com/

  22. Sarah says:

    If you have a card that charges you a fee for nonusage, you should be cancelling that piece of garbage on general principles–it’s obviously offered by a very shady lender who will doubtless be looking to screw you over in other ways. Charging you a fee for *not* lending you money? *Bleep* that noise!

    The basic problem here is that one of the FICO factors is percentage of utilization of your current credit limit. Thus, if you have two cards with credit limits of $1000 each, and owe $500, you have a utilization of 25%. Close one card, and the utilization rises to 50%, even though your debt hasn’t changed at all. So you need to be careful about closing accounts if you’re going to get that kind of result. Take the card out of your wallet instead and stick it somewhere safe until you’ve finished paying off your cc debt (that *is* your goal, right?).

  23. Debbie M says:

    My advice is to keep the oldest card, the one with the best rewards (for stuff you will pay off at the end of the month) and the one with the lowest interest rate (for purchases that will roll over).

    My reality is that my oldest card has my best rate and I haven’t used it in years. But then I have been sucked into several rewards cards: one for gas/groceries/drug stores, one for home improvement stores and other things, one to give me free shipping from an online store I like, and, um, two I signed up for because of introductory offers which have now expired but which occasionally return. Crazy. None of them have annual fees, at least.

  24. dave d says:

    I would rather just let my cards expire instead of canceling them – it makes for a longer average for the amount of time I’ve had a card, and this is something CC issuers look at, is it not?

    If you don’t use a card, great…don’t use it, but don’t cancel it. Won’t it reflect positively because the average age of your credit cards increases?

    Maybe I just have my head up an ‘exit-only’

  25. Credit says:

    This advice is contradicted by a large amount of evidence. The problem is that people make logical arguments for why your score should be higher — ratio of your credit limit to your income, etc. Unfortunately, the opposite is true in most cases. The contradictory logical argument is that credit card companies trust you with larger credit limits or more cards with respect to your income, so you are more credit worthy. Since FICO is a risk model, it doesn’t use either type of logic, only real data. Unfortunately, this is where most people go wrong and end up lowering their credit score by following advice posted on this blog. Because you may change scorecards, it is not entirely clear what impact this will have, but anecdotal evidence suggests this is a bad move and having more cards is better. This helps utilization, average age and most likely puts you in a scorecard with a less responsible population, which improves your score. If you want lower insurance rates, mortgage interest rates, etc. keep all cards open, the best evidence suggests that you should use them once every six months.

  26. Anne says:

    $8500 a year in credit card rewards???!!?? Unless that’s mostly coming from credit card arbitrage and reimbursed business expenses, it looks like a spending problem.

  27. dave d says:

    unless of course that’s factoring in BT monies, in which case it’s a pretty achievable figure.

  28. Elizabeth says:

    My husband and I also use the Drivers Edge. I had the student version and finally got them to change my status (and lower the interest rate). I’ve only held a balance past one month once and that was while I was a student and needed to wait on money to pay a school bill. Anyway, I wanted to let Trent know that Drivers Edge points can be converted to ThankYou Points. DH and I are saving for a car now, but we just purchased a washer and dryer. Our converted points paid for several hundred dollars in gift cards.

    Anyone know how to close an old used account that is joint. I signed for a card in high school to get credit and my mom co-signed. I can’t get anyone to close the account now. They say we both have to be in the same place (I never even had a physical card to use). Any suggestions?

  29. LexNaturalis says:

    Re:I love my debt score

    You do not need to give your social security number to any utility company. My electric company will allow you to simply pay 1 month’s payment as a security deposit (that’s return after 12 on-time payment) and there’s no credit check. I’ve gotten cell phones and local phone service without a credit check.

    Even the bank I got my mortgage through didn’t look at my credit score. They did manual underwriting.

    I have a credit card as well as a card that my company gives me, but to insult people who don’t want to use credit is bad form. Especially if you’re going to make universal statements that aren’t necessarily true.

  30. Monica says:

    I am sort of in the opposite situation to the people who prompted this post. My question is, how many cards is it necessary to have? I only have one, my first credit card which I have had about 10 years. It is a MasterCard, it is accepted everywhere, it has no annual fee, it gets me Air Miles, and I don’t care about the interest rate because I pay the balance in full every month. Should I have more credit cards in order to positively affect my credit rating? If so, how many?

  31. chris says:

    I had 2 cards for awhile, my amazon visa and my credit union atm/check card. This year it’s ballooned to 6 cards for some very good reasons.

    I was given 250$ to get a second visa (the freedom card) this card is now sued to get 3% on certain things while the amazon is used for general stuff. I got a best buy mastercard to replace my aging best buy rewardzone card. I got 25$ for free and get double rewards on bestbuy where i generally buy most of my entertainment (amazingly i spent elss this year at best buy then most years). The mastercard is also used at sam’s club where visa is not accepted. And I signed up for an amex card (no fees) for a free 100$ gift card and for the rare opportunities where an amex card comes in handy (i.e the amex wishlist promo).

    And finally I now have a second atm/check card from charles schwab.

    Not all the cards are kept in my wallet 100% of the time, some are kept in my locked glovebox or at home. I think the system works for me now, but eventually I may consolidate the two visa cards (probably after I accumulate 200 in reward son the freedom)

  32. AndyJ says:

    Trent and all, I used to work for myFICO.com and while most of the advice is sound in this article, i can tell you that cancelling credit cards is simply not as effective as simply keeping the accounts open and cutting up your cards. Credit Scores love the credit utilization ratio – credit usage/credit limits. So the more cards you have that aren’t being used, the higher your credit score. Cancelling cards, especially around the time of looking for a loan, is not a great idea. My score is a 769 and i have a bunch of store cards that i never use that are cut up but the accounts are open.

  33. Karen says:

    Just wondering, when determining your “oldest card”, does it matter if the bank owner has changed? Both of my oldest cards have been through one or two takeovers – MBNA became Bank of America, for example – sometimes the numbers stayed the same, other times the card was reissued with a new number. I don’t think either of the cards I’ve had the longest are still issued under the same bank they were originally.

  34. Trent says:

    When I first started hunting for a mortgage, a loan officer pulled my credit report and almost immediately advised me to cancel some of my unused cards or at least get their limit lowered. She directly told me that having a large unsecured credit line looked dangerous to any lender, particularly when that total credit line began to approach our annual household income. Since we wound up with an extremely low 30 year fixed (under 6%), I tend to believe the advice. Even more importantly, not having 20 credit card numbers out there means a much smaller chance that a data slip-up somewhere at the bank will result in my identity being stolen. I can’t conceive at this time why someone would want a wallet full of cards unless they enjoy risk.

  35. Lauren says:

    Shortly after I turned 18 I opened two cards– one with Wells Fargo and one with Citi. Wells Fargo was very inflexible and gave me a much lower limit so I canceled it and have dealt mostly with Citi since then. My favorite thing about Citi is that they have always been willing to lower my interest rate when I call and will convert my exisitng account to other card types. This allows me to keep the same account number (and thus the same account history) while getting the best bonuses possible. Right now my account is under the Upromise program which lets me earn $ toward paying my Sallie Mae Stafford loans. The Upromise card also works to build savings for a child’s college fund.

    I also have the Amazon Visa and a Discover Card for various rewards purposes, but none carry balances. I only have two open store accounts and I pay them off immediately after I use them. I am only 21 now but my credit is so good that American Express approved me for a $5,400 limit on a student’s income. I could do some serious damage between all these cards but I am very careful with them. My strategy has been to get a card from each major provider (MasterCard, Visa, Discover, AMEX) to test drive the customer experience. Visa and Discover have never done me wrong, but my Citi MasterCard has been my favorite so far.

  36. pam says:

    Trent – the advise from your loan officer was in regards to mortgage underwriting. It has no relationship to your credit report.

  37. Jen says:

    Along the lines of keeping a thin wallet…I like a thin wallet and a light key chain and most stores have “saver cards” and/or key chain tags now. Instead of filling up my credit card slots or weighing down my keys, I cut out an index card and tape the tags to it. I can fit 4-6 on a card, it works great, and I only use one credit card slot.

  38. Credit says:

    It is not logical, but FICO appears to reward people for having many cards ~5-10 with high limits. Canceling cards or lowering limits will most likely reduce your FICO score. If you have a perfect and long history, this is not a problem, but if you are on the border of the prime territory as many people are, a few points lost could be a very costly mistake. At the same time, it is not good to go out and apply for credit before you are shopping for a mortgage. Since it is a risk model and not a human, it may reward behavior that contradicts what your loan officer suggested.

  39. chris says:

    stupid question, but i have a discover card and they sent another pre approved application but it looks like its for the same credit card. Can i have 2 cards from disover?

  40. Elana says:

    I used to have more than 10 credit cards from various issuers.

    I trimmed down to only a few recently, terminating those I almost never used in the past 6 months.

    Now I’ve only 3 active cards:-

    1)Online purchase/paypal. I am using a classic credit card with low credit limit to avoid fraud on purpose. This is to void the crooks who love to steal credit cards with high credit limit.

    2)Gas/Monthly Bills. Again, I sued a low credit limit card to avoid fraud at the pump.

    3)Shopping. I use Platinum card for big purchase. plus I love this card issuer as I ‘ve a AAA credit ratings with them.

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