Credit card bloggers sometimes brag about all the cards they have, and the many sign-up bonuses they have accumulated. This works for these hard core aficionados, but regular cardholders should not be as enthusiastic about opening and retaining so many accounts. To help decide if you have too many credit cards, consider the following questions:
Are you paying interest on many different cards?
If you are carrying balances across multiple accounts, you are almost certainly paying more interest than you should. Store cards, gas cards, and reward cards will usually have a higher interest rate than the most competitive products offered by each bank. The smart thing to do is to open a new account with a 0% APR financing offer on balance transfers. Then, consolidate the balances from each account within the eligible time period for the promotional balance transfer. Doing so will save money on interest while reducing the number of bills being paid each month.
Are you paying annual fees on several different cards?
There are many cards that offer valuable rewards that are worth paying an annual fee to receive. Unfortunately, this logic does not scale up. In fact, it is rarely justified to pay an annual fee on several different cards. Since the annual fee for each card represents a fixed cost, each card’s value increases the more you use it. By spreading that value across several cards with annual fees, the average value returned from each card will inevitably be reduced.
Do you lack a rewards card?
The worst case scenario is a cardholder that has many cards and no debt, but fails to earn rewards from any of them. So long as cardholders pay their balances in full each month, they should be earning as much rewards as possible. Rewards can be in the form of cash back, airline miles, or other loyalty points. The bare minimum rewards that a reward card holder should expect to receive should be worth 1% of the amount spent.
A good rewards card for a cardholder that is new to the concept of rewards would be the American Express Blue Cash Preferred. For a $75 annual fee, it offers 6% cash back on groceries, 3% back at gas stations and department stores, and 1% cash back everywhere else. More advanced reward card holders will enjoy the Sapphire Preferred card from Chase. It offers Ultimate Rewards points that can be redeemed for airline miles, hotel points, cash back, or other awards.
For additional information, on rewards cards, please see our rankings of the best rewards cards here.