Why Could It Be Bad To Have Too Many Credit Cards?

They show up in your post box nearly every day - those bright, shiny offers of £5000, £2500, £1000 or more for which you are ALREADY APPROVED! All you have to do is telephone to this number, or return this application or log on to this website to confirm, and they'll send you a pretty plastic credit card that guarantees you the right to charge anything you want. Like that CD? Whack it on your credit card. Want to take that trip to Gay Paree? Just hand over your credit card. How could it be bad? After all, the credit card company says that you're already approved, and they wouldn't do that unless they thought you were a good credit risk, right?

Unfortunately, there are many reasons why having too many credit cards is a very bad idea. The most obvious is that the more credit you have available to you, the easier it to get into the habit of whacking anything you want onto your credit card and worrying about the bills later. Unfortunately, when you're dealing with multiple credit cards, it's hard to keep track of exactly how much you're spending. Before you know it, you could be buried in credit card debt up to your eyeballs.

Let's say that you're a very responsible bill payer, though, and you keep careful track of all that you spend. All the accounts come in and are paid immediately, and just for the record, you don't even carry a balance on most of those credit cards. Is it still a bad thing?

In a word, probably. Chances are that you're spending far more than you think to keep that pack of plastic in your wallet. There are annual fees and service fees and minimum monthly payments which can add up over time and number of credit cards that you hold. In many cases, your credit card agreement reads that you'll pay a minimum monthly payment of £X amount - where X may be 5 or 10 or something low enough to seem like too little to bother with - or X% of your account balance. So you're carrying a balance of £0 on five different cards, it could be costing you £25 to £50 per month - to not use your credit cards.

Still not convinced? Take a look at what happens when you apply for a mortgage or personal loan and you're holding eight or ten or more credit cards and store charge cards. One of the items that appears on your credit score is your available credit. Available credit is calculated by taking the ratio of how much credit you have available (adding up the credit limit on all your credit cards and lines of credit) and how much you owe on them in total. Even if your ratio is low, having a high figure in that ?available credit' column can hurt you by lowering your credit score. The reason? Potential lenders don't see a responsible borrower with a great deal of self control - they see a borrower who has the potential to dig himself seriously into debt.

What's the solution? The first is simple enough. Just because you are invited to apply for a credit card doesn't mean you have to do it. If you're satisfied with the credit card or cards that you have, toss the offer in the waste bin.

If you're already carrying too many credit cards, consider winnowing them down to the few most important to you. One way of doing that is to look into a balance transfer credit card UK companies may have on offer.  You can compare credit cards and APRs at moneyeverything.com to find the best balance transfer cards, and move the balances from several cards onto one with a lower interest rate, then close out the other cards. That way you effectively cut down on your available balance and lower your monthly bills at the same time.

For more ideas about controlling your spending and credit card use, see other articles on credit cards and loans at moneyeverything.com.