I have been doing the Balance Transfer thing for a year now to try and pay off my debt and just transfered for the second time, my high balances to a new 0% APR card.
After this balance transfer is complete I will have 3 Credit Cards that will be paid off. Should I cancel these extra cards? Are there any laws about how many Credit Cards you can have open at one time? Or how many balance transfers you can make?
Thanks.
Congrats on getting rid of the high interest accounts.
Holding those accounts open can negatively affect your credit rating, though. From this site (partnered with Equifax):
Unless you want to have an open line of credit available for emergencies, call them and close your account. It might even work to your advantage, as some (most?) companies will actually offer to lower your interest rather than lose your account entirely, giving you yet another avenue for balance transfer (if needed).
As for laws regarding the number of accounts and/or balance transfers, I believe that would be solely at the discretion of the credit issuers (note: I am not a lawyer). Of course, if your credit history already shows a number of open accounts, chances are you’ll find it increasingly difficult to open more. Credit issuers look at the maximum amount you can charge on your lines of credit, not the outstanding balance, when determining whether or not to open your account (i.e. two accounts with a spending limit of $10,000 each add up to a potential liability of $20,000, regardless of the actual balance of either).
You can have as many credit cards and balance transfers as you like. However, for the sake of your credit score, you should cancel the accounts you are not using. (Simply not using the cards isn’t enough; having tons of unused credit available that you never use will actually lower your score.)
OK - thanks. I will definitely cancel my unused cards then.
My insurance company ran a credit check in connection with the recent renewal of my auto insurance and (as required by law) they notified me of the results. The fact that I had a high amount of available credit in proportion to my income was listed as a negative factor. Fortunately, I had other positive factors to offset this, so there was no increase in the cost of my coverage. I had just paid off several credit cards, which I am now cancelling to prevent any future problems. I also requested a copy of the credit report so I can check for any other potential problems.
dreamer, unless you’re income is really low relative to the limits on the three credit cards you have, you probably shouldn’t close them. Three credit cards isn’t that much at all, unless you have $15,000 available and only make $20,000 year!
Someone I know just checked their credit last week with the Equifax FICO score – those 11 credit cards (10 with a zero balance) still had a good score at 775 out of 850 (this is good enough to never be denied credit for anything on account of your score [although other factors could apply]). I think the credit available vs. income was roughly 3:2 (income:revolving-line). Of course income probably isn’t on the credit score, since it doesn’t show up.
If you have only three cards, keep them, but don’t use them. Then check your credit score online. If you’re satisfied, there’s no reason to get rid of them.
IMPORTANT: I’m not a credit counselor nor do I work in the industry. But I’m an experienced credit user (and former credit loser), and in my experience three revolving accounts is not very many. Experian says 4-5 is the national average, and 600 something is the average credit score (and under 620 is particularly bad). They also says average consumers have 35% debt-to-credit-available ratio.
Right now I have 9 Credit Cards :eek:
Only 3 of those have large balances (that I just transfered to pay off)
The remaining 6 have very low balances, two of those have a zero balance. I think I’m going to cancel the 2 with a zero balance and keep the lower balance ones to use once in a while. The 3 with the large balances I do not use at all - I just want to pay them off.
So that leaves me with 7 open accounts. That’s more than the national average of 4-5. Should I cancel two more? I hate debt 
D’oh! I really misunderstood the situation! Yeah, I’d get rid of a couple more if it’s a concern for you or you have a high available:income ratio. I really, really hate having debt, too (car and house is normal), but it’s really reassuring to know I could take out everything from my credit cards and move to a non-extradition-for-fraud country whenever I want :).
On the other hand, “national average” is also a not-so-good credit score, so… have you ever used the FICO simulator as Equifax? You need to pay for your credit report, and it doesn’t simulate closed accounts, but it’ll help when deciding transfers and such.
Oh, I’d probably not cancel my oldest account if I were you. Probably doesn’t matter and it’s my superstition, but I have a Hudson’s credit card (first ever) from 1989 (I was in high school). I never use it, so they’ve never updated me to a proper “Marshall Field’s” card, but Equifax shows it as still being open. I asked in Marshall Field’s once, and they said it was still good (no expiration) and if I used it, they’d automatically send me a Marshall Field’s card. That’s most why I don’t use it, stupid Marshall-Fields non-Detroit-based business.
D’oh! I really misunderstood the situation! Yeah, I’d get rid of a couple more if it’s a concern for you or you have a high available:income ratio. I really, really hate having debt, too (car and house is normal), but it’s really reassuring to know I could take out everything from my credit cards and move to a non-extradition-for-fraud country whenever I want :).
On the other hand, “national average” is also a not-so-good credit score, so… have you ever used the FICO simulator as Equifax? You need to pay for your credit report, and it doesn’t simulate closed accounts, but it’ll help when deciding transfers and such.
Oh, I’d probably not cancel my oldest account if I were you. Probably doesn’t matter and it’s my superstition, but I have a Hudson’s credit card (first ever) from 1989 (I was in high school). I never use it, so they’ve never updated me to a proper “Marshall Field’s” card, but Equifax shows it as still being open. I asked in Marshall Field’s once, and they said it was still good (no expiration) and if I used it, they’d automatically send me a Marshall Field’s card. That’s most why I don’t use it, stupid Marshall-Fields non-Detroit-based business.
Regardless of what the “rules” may be, it is very easy to get credit privileges well over your annual income. I once had 15 major credit cards and credit lines (mastercard, visa, american express). One day I added up total credit available (used and unused) and was awed to discover that I could charge over 4x my annual salary. I was further amazed when I sat down and calculated my credit card debt that I owed 1 1/2 times my annual salary (gross).
It is very easy to get “lost” in debt when you have numerous credit cards. People tend not to add up all those balances; just pay the minimum due every month. Another thing people tend not to notice is that the finance charge usually eats up most of your monthly payment. If your monthly payment is $100, the finance charge may be as much as $95, so you are only lowering your balance by $5 a month, keeping subsequent finance charges high.
Ten years later, I am still paying off one of those accounts. It’s been a long, long haul, but I am learning to live without credit cards. I now have one credit card that has a $300 limit, one woman’s clothing store card with a $400 limit and a major appliance store card with $3,500 limit. Most purchases go directly against my checking account. You’ll be surprised how much disposable income you have once you’re not paying a lot of credit card financing charges!
It’s difficult to separate what you need from what you want when you’re used to throwing stuff on credit cards. You don’t “plan” purchases anymore or save up for a purchase. Throw it on a card and make the monthly payment. I can only hope I don’t get sucked into doing that again!
Back to the OP’s question…I never found having so much open credit ever adversely affected my ability to get more credit. Pre-approved credit card applications arrived in the mail almost daily, and anything I wanted to purchase otherwise got automatic approval (i.e., store credit lines, etc.). The only asset I own is my home, so it’s not as if there was anything to “attach” if I defaulted.
My guess is that there are many more factors in deciding your credit rating than how many cards you have or what your credit availability may be and it’s difficult to say which things might take priority. Stability is probably major - work history, whether you own or rent, changes of address, as well as your “payment on time” record.
One thing you might consider if you don’t want to get rid of your “extra” cards is to call the banks and ask them to lower your credit limit. If they refuse, cancel the card. A low-limit credit card can serve as a buffer against an emergency expense, or to use for online purchases if you are leary about using your debit card. It also prevents you from racking up another big balance that will have to be transferred in the future.
Yes, that is why I’m doing the balance transfers so that all my payment goes directly to my balance. I’m pretty sure you have to have good credit to even get the 0% APR for a year cards too, though I could be wrong. I’ve been able to keep track of everything pretty well by writing it all down. I’ve also been able to, thankfully, watch those high balances go down.
I think when you are young and introduced to credit you don’t realize how easy it is to get “lost” in your spending habits. For my SO and I, when we got our first credit card we bought necessary things such as a Fridge, Washer and Dryer, TV, Microwave etc and had to put a lot of my SO’s dental bills on credit. Then of course we had to get a computer and some furniture and go on vacation… but now that we’re a bit older and we see how high those balances have gotten, we realize it’s time to stop using them and only buy what we need or save up for what we want.
It’s all a lesson in life I guess. Hopefully one you learn before you owe a whole year’s wages, which thankfully I am nowhere near close to being that far in debt. Well, maybe if you count the cars and the student loans