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[Skellig Gra]

Why does cancelling a card reduce your credit score? I don't get it.

It's 2 things mainly. The first is it lowers your available credit. The less credit you have available to you the less trustworthy you seem to new potential lenders. The second is credit history. You are judged heavily on maintaining open lines of credit for a long time. The longer that time is the better it is for you. Think of it this way. Which seems more trustworthy? A credit card you paid off for 2 months in a row, or a credit card you paid off for 200 months in a row?

 

[PsychoSoldier]

Why does cancelling a card reduce your credit score? I don't get it.

Less credit, less accounts (up to a point) and average age of credit all affect your score.

 

[Shake Appeal]

I've got two credit cards and one debit. I don't understand why you would want more unless you actually enjoy the hassle of remembering all the rotating categories and miles, discounts, cashback, etc.

 

[muu]

Close cards w/ annual fees you won't be using and those that you plan to churn rewards with. If you have too many cards w/ a certain branch it may adversely affect your chances of getting a new card, but that's more like "hey I'm getting denied for CSP because I already have 8 Chase cards" or something like that which likely isn't your situation. Do try and keep a running spreadsheet of cards and benefits if your plan is to maximize those.

TBH I went through the first 10 yrs out of college with a single Amex blue card and had no issues -- the 1.5/5% after 6500 spend was pretty good for the time. Now I've set out to maximize bonuses and sorta wish I did sooner, but that doesn't mean there's any hard and fast right/wrong answer.

 

[The Albatross]

It really is. I never jumped headfirst to the point of keeping spreadsheets and doing research, but it's pretty crazy how much money you can make just by opening a few good cards each year. It's also super embarrassing to talk about for some reason. I tried to explain it my brother-in-law who could use some extra money but I felt like a scam artist the whole time and he wasn't getting it.

I'm with you.

And for the people who 'could use some extra money' it's probably not good financial advice for them to open new credit cards just for perks.

 

[Random Painted HIghway]

We have... maybe 10 between the two of us, both with around 800 credit scores and zero end of month balances. We only really use three or four on a regular basis. Not a big deal if you are conservative with your money.

 

[delaneya]

I dont have any and my credit rating when i last checked was very good,

 

[RMI]

I'm with you.

And for the people who 'could use some extra money' it's probably not good financial advice for them to open new credit cards just for perks.

I mean, nearly everyone "could use some extra money" but yeah if the reason you need extra money is that you make bad financial decisions then having more credit cards is not a great way to go.

 

[Shake Appeal]

This must be an American thing, I've never had or needed a credit card.

It is. They have this insane and insanely predatory credit industry that allows them to perpetually be in a state of financial precarity and own things they can't actually afford. It's wild!

Also you're pretty much forced to participate in it if you ever want to make a big purchase (e.g. a house).

A small fraction of consumers actually use this system to their advantage (because there are some sweet benefits to using credit, if you stay on top of it). The rest are hemorrhaging money to lenders.

But this is okay because the individual's freedom to make terrible decisions is more important than consumer protection.

 

[Lee]

I'm with you.

And for the people who 'could use some extra money' it's probably not good financial advice for them to open new credit cards just for perks.

Yeah, I quickly realized that. The only reason folks "at the top" are able to make money from churning cards is because those bonuses suck in plenty of people who carry balances and pay tons of interest. If it wasn't making the companies a ton of money they wouldn't be handing out $500 to new customers.

Also, I'm with you regarding credit score companies playing off of people's ego and anxiety. It's all morally bankrupt.

A small fraction of consumers actually use this system to their advantage (because there are some sweet benefits to using credit, if you stay on top of it). The rest are hemorrhaging money to lenders.

You said it better.

 

[mrhyderager]

The right answer is you can have as many as you want as long as you're good at managing your finances. If you use each one with some regularity and pay them off promptly it doesn't hurt. It will give you a higher over-all available credit amount and keep your utilization low.

On the flip side, if you're not good at keeping things together and you're regularly rolling large balances from month to month, keep it low, to one or two cards tops - and with manageable limits should you ever need to max it out and make payments.

 

[cwmartin]

It is. They have this insane and insanely predatory credit industry that allows them to perpetually be in a state of financial precarity and own things they can't actually afford. It's wild!

Also you're pretty much forced to participate in it if you ever want to make a big purchase (e.g. a house).

A small fraction of consumers actually use this system to their advantage (because there are some sweet benefits to using credit, if you stay on top of it). The rest are hemorrhaging money to lenders.

But this is okay because the individual's freedom to make terrible decisions is more important than consumer protection.

This is a little disingenuous, but not outright false.

The reason this "credit culture" exists, is primarily because of two things. The need for personal reliable transportation, and the profound American idealism of owning a home.

Americans need to have a job. Americans need cars to get to their jobs. They need cars because there is little reliable mass transportation. This is because America is really big (and lots of lobbying and crony capitalism). The credit industry fills this gap by allowing many Americans to afford reliable transportation to get to work.

To say this exists simply for egregious american consumerism misses the historical point of the consumer credit industry.

EDIT: The bottom line is, and this would apply to anyone living in any country, that if you are fine managing your money then the number of credit cards will not matter.

 

[Lee]

To say this exists simply for egregious american consumerism misses the historical point of the consumer credit industry.

It might have a more noble or necessary history, but it's lost it. My first exposure to credit cards was some people at a table at college offering free Chipotle coupons if you filled out an application.

Which, of course, I did.

Also working in retail as a highschooler, I was relentlessly pressured to get people to apply for store cards with horrible terms when I wasn't even old enough to apply myself and had no idea what I was talking about. So many people applied because I sold it to them with a smile and a 15% discount.

It's all a mess.

 

[Wellington]

I have had in my lifetime well over 20 CCs and I have closed a bunch too. Not even sure where I am now to be honest, Mint keeps track of that stuff so I don't waste precious brain space. Either way my credit score is very good.

 

[jackal27]

Never had one ¯\_(&#12484_/¯

Apparently I have insanely good credit though from paying off my student loans and my wife's engagement ring.

 

[demosthenes]

2. I think more than that is silly. You're diluting your points too.

This must be an American thing, I've never had or needed a credit card. I've had the same VISA/Debit card my bank gave me 14+ years ago, they just send me a new one when the old one expires.

I like free things.

 

[Redd]

I have 3. A Mastercard, Discover, and an American Express. No problems because I always pay my bills. It's like free money.

 

[Zoe]

2. I think more than that is silly. You're diluting your points too.

Not a problem if you focus on cashback rather than points.

 

[Khalifa Jayy]

1

No.

Five cards? Jesus.

I think my max has always been two.

No.

I have three, two of which are store specific and never even used, and that seems like too many.

No. But your fault for getting store cards.

1 is the joke answer, but you gotta build credit somehow. I'd say if you have 3 you really need to stop. I personally have 1, but I could see having 2, with one for credit building and another for emergencies. As viable.

No. 3 isn't "really need to stop" territory. It's "just getting there" territory.

Two is too many. I have an 800 credit score and Ive never had more than 1 credit card. Not only that but Ive never ever kept a balance on the card. It gets paid off every month.

Two is not too many. Please post a credit report. Interested in what the rest of your credit profile looks like.

It doesn't really matter if you keep them paid off. Unless I'm underthinking something. I have 5 cards too for different perks and stuff. I have a Citi Double Cash card for general purchases, a Chase Freedom for 5% back categories, Amazon Chase for amazon purchases..

Never paid any interest on any of those.

This is the best answer in the first few posts. 3-6 is really the perfect range. Depending on rewards, offers, exclusive discounts and financing options, etc. The key is to never pay a cent in interest by being a responsible consumer.

 

[Dishwalla]

I have two cards, don't see any reason to have any more. One of my cards has a limit of $17,000 which is a scary amount to me, have only ever had like 4 grand on it at a max. I know I could drop that limit, I just never have.

 

[Valkyr Junkie]

3 mains (Amex, Amazon Visa, Costco Visa) but I have a few other store specific cards. 0% financing is a hard thing to pass on when you've got great credit and are good at managing your money.

 

[King Gilga]

However many you can handle.

I only have one personally.

 

[dc89]

I have one.

 

[Mr. Giggles]

One is my limit, the last thing I need is taking more money that isn't mine

 

[hampig]

Anything over 1. I use one just as an in-between my bank account and purchasing stuff to build credit.

 

[The Technomancer]

I've got three, I guess.
A Discover card from college I use for most daily stuff
a VISA from my bank that I use if I need it
A very nice company card in my name that I get to use the benefits of

 

[KillerBEA]

1 is the joke answer, but you gotta build credit somehow. I'd say if you have 3 you really need to stop. I personally have 1, but I could see having 2, with one for credit building and another for emergencies. As viable.

I currently have zero, but this is my thought process for when I do get one.

 

[trixx]

I'm not an organized person so I'll stick with 1.

 

[youngplaya21]

3-5 is a good rule of thumb, actually. I have 5, and I don't have any issues:

Chase Amazon: 3% on Amazon, 2% on restaurants/fast food/drug stores, and 1% on everything else (this is my Amazon/eating out card)
Bank of America Rewards: 3% on gas, 2% at grocery stores, 1% everywhere else (this is my backup card. First credit card that was opened over 8 years ago)
American Express Blue Card: 3% on groceries, 2% at gas stations, 1% everywhere else (this is my grocery/big purchase card)
Capital One Quicksilver: 1.5% for everything (all of my utilities are auto-pay with this card. 2nd oldest card that was opened over 7 years ago)
Chase Freedom: 5% on random categories (use it for whatever categories give bonus points)

Pay them all off in full every month with no issues, and get to enjoy free points for doing what I would be buying anyways. Actually thinking of getting the Freedom Unlimited card as well. Idk why people are so paranoid about having credit cards, unless you can't handle the responsibility. I can see over 3 as being a bit excessive though, but my first two credit cards weren't the best rewards wise so I just use one for online purchases (PSN/itunes/Google Store/etc) and the other for utilities and put them up to keep them open. Helps a lot that I have a Chase checking account, so my Amazon/Freedom card essentially act as my debit card since it takes seconds to pay on the cards via my checking

No.

No.

No. But your fault for getting store cards.

No. 3 isn't "really need to stop" territory. It's "just getting there" territory.

Two is not too many. Please post a credit report. Interested in what the rest of your credit profile looks like.

This is the best answer in the first few posts. 3-6 is really the perfect range. Depending on rewards, offers, exclusive discounts and financing options, etc. The key is to never pay a cent in interest by being a responsible consumer.

Khalifa clearly knows what's up

 

[irriadin]

I have the Chase Freedom and Chase Sapphire Preferred Cards. I use them in tandem and it works really well. I got a roundtrip plane ticket across the country for Christmas to a regional airport for about $190.

I also opened up a Bestbuy Visa card to purchase a TV with 0% financing. Paying that off fairly quickly. I may keep that for the Best Buy rewards, which are actually pretty decent.

I've heard good things about the Chase Freedom Unlimited. I may add that to my stable of cards at some point.

 

[andythinkpad]

As long as each cc serve its purpose you can have 10+ cards.

I got a Amex card for the double warranty and Amex special rewards

I got a Discover for quarterly 5% rewards

I should have a card that give most gasoline rewards, but I recently realize buying giftcard on ebay is still cheaper so no need for another card

I got a Citi Double Reward card for 2% everything reward.

I got a Amazon store card for 5% all Amazon purchases (this includes 3rd party merchants that uses Amazon payment.)

These four are essential cards IMO everybody should have.

The rest is up to your life style. You could go with flyer card, chase reserve or simple card that give you high signup bonus.

 

[HowZatOZ]

I've got two, both with $1000 limit and both being paid off. My credit rating is pretty top notch at the ripe age of 25 thanks to paying off my personal loan of 10k at least three years early. I still feel like two is plenty and any more is just crazy talk for debt. Hell $2000 is plenty for me and by start of next year I hope to have one paid off and closed as it is just a basic credit card.

 

[youngplaya21]

I've got two, both with $1000 limit and both being paid off. My credit rating is pretty top notch at the ripe age of 25 thanks to paying off my personal loan of 10k at least three years early. I still feel like two is plenty and any more is just crazy talk for debt. Hell $2000 is plenty for me and by start of next year I hope to have one paid off and closed as it is just a basic credit card.

If you get the right two, maybe. Maybe one that gives 1.5% or 2% cash back on every purchase and one more that gives 5% back on rotating categories. I can see that being the case for keeping just 2 and being fine. And $2k is nothing: remember that credit cards are used for emergencies too (and that people have families, cars, travel expenses, etc.). Plus it's not like you have to use every dime of the limit. My AMEX has a $10k limit and I don't think I've even used more than $300 on it

 

[Ron Mexico]

By my last count, I have 16. Of those, I only use 2 and neither one of those have balances as I pay them off in full every month. At least 10 of those are lines I've had open since my early 20s (store cards and the like) that I haven't used in a decade. I don't worry about them being out there because I pull my credit once a year-- just like you should.

Albatross was correct when talking about FICO e-peen, with one small correction-- anything over about 740 (not 790) is gravy. The only benefit in going higher is allowing for more headroom in case something changes. An 810 FICO isn't going to command a better deal than a 750.

Next, the part of the underwriting criteria to fret about is NOT the amount of total available credit. It's the ratio of the outstanding balances to the total amount of credit you have available. It doesn't matter at all whether the balance is all on one card or split among several-- it's outstanding revolving debt divided by total available credit.

CreditKarma is such a misnomer. All the people here spouting off scores from CK, Discover and the like are using an approximation. This is not your actual credit score. Closest analogy is CreditKarma is to your FICO score what Zillow is to your home's value. They'll likely be in the same ballpark, but don't ever count on them to be exact.

These threads make me sad honestly. The number of misconceptions about credit and how it works means we've done a poor job educating the public on these things.

 

[The Lamp]

So, I kind of expected these sort of responses, but nothing I've seen actually says you're penalized for having a variety of cards. Just that you can't close them once they're opened.

Which seems backwards, but those seem to be the rules

What about cards with annual fees? Are you encouraged to keep them forever even if you don't want to pay that fee, just for the sake of credit score?

 

[1.21Gigawatts]

you gotta build credit somehow.

Is this a thing anywhere else other than the US?

 

[mhayes86]

Don't cancel cards that you have an existing history with. Eventually new cards come out with better benefits, so you get a new one without cancelling a previous card. I have 5 active credit cards, but only one that I use regularly. Two others that get used on occasion are a company card for work travel/expenses, and a personal travel card.

What about cards with annual fees? Are you encouraged to keep them forever even if you don't want to pay that fee, just for the sake of credit score?

I think some places may allow you to upgrade your card to one without an annual fee.

 

[WorldStar]

What about cards with annual fees? Are you encouraged to keep them forever even if you don't want to pay that fee, just for the sake of credit score?

More often than not, you can downgrade to a product with no annual fee and avoid closing the line of credit

 

[Ra\/en]

I have 3.
I have a backup personal card, an everyday card with travel rewards, and I have a business visa for my business related expenses.

My wife has a mastercard and a visa card.

 

[gaiages]

I personally have two, one with a good limit for emergencies that carries no balance (unless said emergency happens) and one that I put my day to day purchases on for the cash back. I have considered one more for increased cash back from Amazon, but I feel it might be too much.

I'm also working on building my credit up so that's half of why I even got a second card.

 

[Ron Mexico]

What about cards with annual fees? Are you encouraged to keep them forever even if you don't want to pay that fee, just for the sake of credit score?

I would only keep a card with an annual fee for one of two reasons:

1) I was unable to get any other options--secured cards and the like usually have an annual fee attached-- still good for those (re)building a history

2) I make enough in benefits and rewards to offset the costs of the annual fee

If neither of these apply, I'd take my business elsewhere. While it's true that multiple credit pulls can impact your score, the impact is significantly overstated and completely negated by the advantages of having appropriate lines and balances.

 

[SpecX]

By my last count, I have 16. Of those, I only use 2 and neither one of those have balances as I pay them off in full every month. At least 10 of those are lines I've had open since my early 20s (store cards and the like) that I haven't used in a decade. I don't worry about them being out there because I pull my credit once a year-- just like you should.

Albatross was correct when talking about FICO e-peen, with one small correction-- anything over about 740 (not 790) is gravy. The only benefit in going higher is allowing for more headroom in case something changes. An 810 FICO isn't going to command a better deal than a 750.

Next, the part of the underwriting criteria to fret about is NOT the amount of total available credit. It's the ratio of the outstanding balances to the total amount of credit you have available. It doesn't matter at all whether the balance is all on one card or split among several-- it's outstanding revolving debt divided by total available credit.

CreditKarma is such a misnomer. All the people here spouting off scores from CK, Discover and the like are using an approximation. This is not your actual credit score. Closest analogy is CreditKarma is to your FICO score what Zillow is to your home's value. They'll likely be in the same ballpark, but don't ever count on them to be exact.

These threads make me sad honestly. The number of misconceptions about credit and how it works means we've done a poor job educating the public on these things.

Holy shit 16 is insane, but I agree with everything else in your post. I have 4, 3 major cards and 1 store card. I've reduced the amount I had since a lot of the smaller balance cards weren't giving me increases and Discover pretty much covered the amount I had on those cards when I got them.

 

[youngplaya21]

By my last count, I have 16. Of those, I only use 2 and neither one of those have balances as I pay them off in full every month. At least 10 of those are lines I've had open since my early 20s (store cards and the like) that I haven't used in a decade. I don't worry about them being out there because I pull my credit once a year-- just like you should.

Albatross was correct when talking about FICO e-peen, with one small correction-- anything over about 740 (not 790) is gravy. The only benefit in going higher is allowing for more headroom in case something changes. An 810 FICO isn't going to command a better deal than a 750.

Next, the part of the underwriting criteria to fret about is NOT the amount of total available credit. It's the ratio of the outstanding balances to the total amount of credit you have available. It doesn't matter at all whether the balance is all on one card or split among several-- it's outstanding revolving debt divided by total available credit.

CreditKarma is such a misnomer. All the people here spouting off scores from CK, Discover and the like are using an approximation. This is not your actual credit score. Closest analogy is CreditKarma is to your FICO score what Zillow is to your home's value. They'll likely be in the same ballpark, but don't ever count on them to be exact.

These threads make me sad honestly. The number of misconceptions about credit and how it works means we've done a poor job educating the public on these things.

It's not like the information is hard to find, either. Between the Credit Card thread here and maybe an outside resource like r/personalfinance, the information is right there for everyone to easily digest.

I do like that people are at least using CreditKarma though. While the score is just a decent approximation, it at least gives you easy access to see what changes are on your credit report every week. I use that to note any changes on my credit report (and thus any discrepancies), and then pair it with an official credit report every year or before a large purchase to check my actual score and report. It's like using baby steps to understand your credit

What about cards with annual fees? Are you encouraged to keep them forever even if you don't want to pay that fee, just for the sake of credit score?

I'd say call the credit card company and see if you can upgrade the card or waive the annual fee. I've done this with at least 3 cards. One credited my account the annual fee amount, and the second (Capital One) upgraded my card to the Quicksilver with no annual fee. If they won't (like my third card I called about), I'd consider cancelling it if you don't think the benefit of having the card open is worth it

 

[Lexxism]

I have 7. I only use 3 most of the time.

 

[The Lamp]

I would only keep a card with an annual fee for one of two reasons:

1) I was unable to get any other options--secured cards and the like usually have an annual fee attached-- still good for those (re)building a history

2) I make enough in benefits and rewards to offset the costs of the annual fee

If neither of these apply, I'd take my business elsewhere. While it's true that multiple credit pulls can impact your score, the impact is significantly overstated and completely negated by the advantages of having appropriate lines and balances.

I want the new Chase Sapphire Reserve for traveling next year and 2018 but not sure if I want those travel benefits beyond those years for the $450 annual fee.

 

[Kito]

I had seven at one point, now I have four. I'm 22. I mainly get credit cards for the signup bonuses.

Hilton - I'll cancel this when I get my next credit card.
BA Amex - everyday spending goes through this for avios points.
Post Office - only used on international trips for 0% foreign transaction fees.
IHG Rewards Club - absurdly large credit limit for credit score and an unforeseen emergency.

 

[lunchtoast]

Just got my fourth one today, but this one has an annual fee but I'm using it to get all the travel perks (chase sapphire) as I'm visiting a few places next year. Other than that I just use my amazon card.

 

[Lexxism]

Is this a thing anywhere else other than the US?

Canada.

 

[Maedre]

First off - don't trust CreditKarma to get a perfect picture of your credit score. Pull a real FICO - you can get a free one a variety of ways. Your real square can easily fluctuate (often for the worse) by ~25+ points from CK.

Credit Karma, for example, puts me at 820. Whereas a real pull put me at 805.

Secondly, you're right - more credit cards just equal, assuming you don't spend more, a lower revolving utilization. The more "available credit" you have, looks better for your score and odds at being a good loanee.

Each new CC does a hard pull on your account. 1 a year is no biggie. 2 is pushing it a bit, especially if you are looking to buy a car or a house. That said, pulls don't terribly effect your score.

The problem with CLOSING a CC is two fold, really: One, it's absolutely going to lower your available credit, and thus also likely demonstrate a higher utilization (even if you pay off regularly). Secondly, if it's an older card - well, now your credit HISTORY isn't as long. And CC history actually does have a pretty significant effect on your score.

Don't go open a new card every six months for kicks. That's a bad idea. But assuming you don't see credit cards as "free money," there's no harm whatsoever in having a bunch of cards.

Like you, I got one right as I turned 18. Another a few years later. Another a few years later. AT 27, almost 28, I have five cards. But just got married, and my wife has four. So that puts us at nine cards. Together, we have about $200,000 of available credit, lol. Thing is, we usually put about $3,000 on one or two cards each month and pay them off, and another ~$3K on business expenses that I get paid back on - so yay points.

Just be mindful that if you have too many cards, and end up not using one for an extended amount of time, the card may be closed on you without your input - which has a negative effect. So even a shit card, I'd use it once or twice a year.

Lastly, if you do have several cards and one is just driving you nuts - you'll never use it - it's likely not going to kill you if you close it. The temporary hit to your credit score is better than either being tempted to overspend or making otherwise bad decisions with credit.

What a fucked up system oO

 

[youngplaya21]

I want the new Chase Sapphire Reserve for traveling next year and 2018 but not sure if I want those travel benefits beyond those years for the $450 annual fee.

I've heard of people downgrading the Chase Sapphire cards to one without an annual fee after a year or two, so that may be an option once 2019 comes around