I just came across an article in the LA Times that has the title “What happens if you close an unused credit card account?
The article basically says keep the number of cards that you have to a minimum and that you should close card accounts that you do not use. Two cards should be enough. You might take a small hit on your credit temporarily but it should recover in a month or so.
There is nothing wrong with the suggestions, but it is more complicated than that. Depending on how irresponsible you are with credit, you might need to cancel them all. The advice here is for responsible credit users and sets you up in the best possible light in most situations.
First you need to see what your normal usage is. Ideally you usually pay off your balances monthly. You want enough credit room so that you do not carry balances over 50% of the credit limit of any card. Ideally, have it under 30%. So if you need that credit room then make sure you can increase the credit limit on the cards you are going to keep before you cancel the rest.
If you already have many cards, I would suggests that you eliminate all the cards but four. Here is my logic. 2 is the minimum to give enough record to show that you are a responsible user but having 2 more just gives you emergency capacity should you need it. Going beyond 4 depending on the credit limit of each card and your credit situation, a lender might think you have too much room to abuse. For instance if you have two cards with $15,000 limit, the lender must consider that you might max them out tomorrow after they give you the loan. So this might affect the rate or even the approval of the loan.
And finally keep the cards with low interest rates, no net cost and long histories. Low interest rate make these cards useful for emergency money. If the rate is 30%, there might be better source of funds in an emergency. No net cost means the monetary benefits from the card minus the annual fees has to be zero or more. No point keeping cards you hardly use that is costing you money. Lenders like long histories because they are more predictive. A minimum history of 2 years is preferred by lenders. Keeping the card with the longest history is a good idea.
These tips should put you in the best possible financial position if you need to remove a few cards from your purse or wallet.
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