How many credit cards is too many?

By: admin

How many credit cards is too many?

If you have any unused credit cards laying around, even if you are not paying any monthly fee for them you would do well to close those accounts, this will help improve your credit score.

Sometimes we take out credit cards to take advantage of the 0% interest rate for transferring balances that we have forgotten about or a reward card which gives us money back every time use it, these credit cards can be a burden on your credit score when it comes to applying for short term loans

Ask yourself why you need these cards, and do they still serve the purpose they did when you initially applied for them, reward cards from the likes of amazon are one example of why we would take out a card but find that we don’t use it as much as we thought.

Did you take out the card because you wanted to transfer balances which have now been paid off, or you took out the card to repay debts maybe to spread the cost of purchases across multiple cards, whatever the reason, if the card is no longer of any use you should consider closing those accounts.

The fewer cards which you have means less temptation to use them, fewer cards to have to keep track off, less chance of forgetting account details or PIN numbers and very importantly less scope for fraudsters getting access to your accounts.

Having fewer credit cards can demonstrate to direct lenders that you are less dependant on borrowing money on a month to month basis and as such your chances of being approved for a short term loan would be greater.

Having fewer credit cards also means you are not having to juggle so many balls at once, it is very easy to forget to repay the balance of off a credit card which means you are now paying interest, and more than that this late payment will count against you when applying for a short term loan.

Decreasing the number of credit cards will also free up your credit utilisation. Keep one maybe two credit cards and use them provided you follow the rules below:

1. Never spend more than 50% of your credit limit, ideally between 25% and 50%

2. Repay the balance of the credit card each month

This will show on your credit report that you are managing your finances responsibly when you are applying for a short term payday loan.

Will my score be affected if I close my credit card (JT)

Each Lender when determining your suitability for credit will calculate a credit score based on their own parameters meaning that you do not have a set in stone credit score.

Some lenders may look at the fact that you have cancelled credit cards negatively

This may sound counter intuitive but let’s break this down:

If you currently have a credit limit of £2000

You have used £1000

This means you have used 50% of your credit limit

Now let’s say you cancel a credit card which reduces your credit limit to £1000, it now means you are using 100% of your credit utilisation.

When a lender is deciding if they ought to approve you for a short term loan they will take these credit limits into account and will use it to work out if you can handle the new credit. So If you are going to cancel a credit card keep your credit utilisation as low as possible hence why it is recommended you repay all credit cards at the end of each month or at least keep your credit utilisation below 25%

Make sure you keep your finances in order, make those repayments, keep your credit utilisation to below 50%, ideally 25% so direct lenders can see that you are a responsible borrower which makes you a lower risk when considering a payday loan.

You can see how lenders see you by examining your Free Experian Credit Score.

How do you cancel an unused credit card?

To cancel a credit card, do all of the following:

1. Pay off your balance, or transfer the balance onto another card

2. Call them and tell them your intentions, make a note of the time and date of the call, ask for a call reference number

3. Write to your credit card provider and state your intentions to cancel and request a confirmation.

4. Follow up your call and email a few days later to confirm.

5. Never, ever ignore your credit cards, and simply not using them does not equate to cancelation

Once you have made up your mind to cancel then cancel, do not be tempted by more offers as credit card companies will always try and retain you are a customer and who can blame them, so when you decide to cancel DO IT!!!

Can I close a credit card account that has a balance? (JT)

Quick answer is NO! you have to pay the entire balance of the credit card before you can cancel and close the account, the credit card provider will keep your account open until the balance is paid off.

Related post

Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk