With all the news that credit card companies are closing accounts and cutting credit limits left and right, my first reaction was to get incensed. How dare they reduce my credit? How dare they deny me what I’ve “earned”? Then I realized that my first reaction upon receiving my credit limit increase letters was laughter. There was no way I needed as much credit as they wanted to give me. If they chose to cut my limit or close my card for non-use, it’s not really that much skin off my nose. I already have a mortgage and my credit scores wouldn’t take that big of a hit. So then I started thinking: how many credit cards do I really need?

The Cards In My Wallet
So, let’s start by counting the number of cards in my wallet. I have four traditional credit cards. One of them gets used for nearly all purchases. Two others get used once a month at most. One probably hasn’t been used since I went to Belize in 2008. I also have one store card in my wallet. There used to be eight, but I discovered that they had all been closed for inactivity when I called to change my address last year. The one remaining is the Goodyear card that I love so very much. This one has a low limit, because it’s only for auto repair purchases. The others still have relatively high limits. There’s also a debit card, which I could use as a credit card in a pinch.

How Many Could I Live Without?
If I were going to really cut back, I think I would keep two traditional cards and the Goodyear card. Not only does the Goodyear card allow awesome payment terms, it also gets me discounts on oil changes and a couple other perks.

As I’ve mentioned before, we put nearly everything on our Amex, even recurring charges like the cable and phone bills. This is part of our mileage-accruement strategy and I’ve been very successful at using those miles for the trips we want to take. So, I’d definitely keep that card.

I’d also keep one other card, either a Visa or Mastercard. If your primary card is an Amex or a Discover, then you should have a Visa or a Mastercard as a back-up. Not all merchants accept Amex. It’s also important to take two cards with you when you travel, just in case one of them gets blocked because of unusual transactions in another city.

So, I started with five cards, and have worked myself down to three that I think are “necessary” for the way I choose to conduct my financial life. Overspending is not a problem for me, so I don’t need to cut my credit to save money. I’d only do it to simplify.

How to Choose Which Cards to Keep
If you want to slim down your wallet, how do you decide which cards to keep? Here are a few simple guidelines:

Other Accounts with the Bank: If you have a checking account or mortgage with a financial institution, consider choosing them as either your primary or back-up card. It’s my suspicion, that banks treat customers with additional accounts better than those with no other ties to the institution. If you like the security of overdraft protection, then this is another point in favor of the bank where you have your checking account.

Rewards: If you have a rewards card and have accrued a hefty point or miles balance, make sure you can keep it or cash it out before cancelling the card. If you can’t, then keep the card until you can use up the rewards. Or, the rewards may be the thing that make the card a keeper, especially if you use them well.

Interest Rates and Fees: Neither interest rates or fees are a huge factor for me (except foreign transaction fees). However, if you carry a balance or sometimes forget to make a payment, then scrutinize the rates and fees carefully. These can change quickly, but it’s at least a place to start.

Foreign Transaction Fees: It doesn’t really matter which extra cards I keep, so I would call to ask about each card’s current foreign transaction fees. These fees can and do change, but they don’t usually come down once they’ve gone up, so I’d keep the card with the lowest foreign transaction fee. The card we took to Belize had a 1% fee, vs. 2-3% for the other cards. Don’t worry as much about the fees for Amex or Discover cards because they aren’t accepted in some parts of the world. Visa and Mastercard are.

Oldest Card: I would be hesitant to close my oldest card because it would reduce the average age of my credit history. However, if you acquired your two oldest cards around the same time, it may be safe to cancel one of them.

Ultimately, I don’t need any credit cards, but they make my life simpler and I like to have them. I don’t need as many as I have, though. If you want to slim things down, consider not fighting the bank if they cut your limit or close an inactive account. As long as you’ve still got a low utilization ratio overall and a long credit history, one closure isn’t going to hurt that much. If you do want to keep a card, then keep it active.

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