Sometimes it sneaks up on you. You go to the store and get 10% off for opening a new account. Oh, and then you can get a discount on gas if you just use the station’s card to make your gas purchases, so you add another. Before you realize it you have 12 credit cards. Maybe you use them and maybe you don’t, but it doesn’t matter much to the credit gods. The number of open accounts you carry can have a negative effect on your credit score.
Why do stores offer you a discount if you sign-up for one of the companies credit cards, does it magically lower their cost of doing business and they want to pass the savings on to you? No, what it does is pave the way to future company profits. With your new credit card in hand they can lure you back in the store, sell you more than you can afford, and make additional profit while you struggle to pay the interest. The pleasure of saving that initial 10% will soon be replaced with the pain of paying for things you didn’t need and probably can’t even recall purchasing.
Let’s face it, you really don’t need all those credit cards and now you’re faced with the hassle of what to do with them. Do you really need any department store cards when they all accept VISA, MasterCard, or Discover? Two to three cards should be enough, any more than that is a recipe for over-spending. Get those other accounts paid off or transfer the balances to one or two cards. You might get a credit limit increase if you call one of your lower rate cards and tell them you are transferring a big balance. In the end your goal should be to have credit cards for convenience with balances that can be paid off within no more than 3 months.
Once you pay off an account that won’t be used again, CLOSE IT. Not only does it eliminate the temptation of over-spending but it closes some potential holes for identity thieves and eliminates paying any annual fees associated with keeping the account open.
Credit card accounts can help your credit score by following a few simple guidelines:
- Limit the number of accounts to just a few, no more than 3.
- Keep the balances well below account limits.
- ALWAYS make the payments on-time.
Check back soon for Part 5 of the Improve Your Credit Series. Click here to view previous series posts.
Dan Anderson
CarManDan
Fargo, ND
New and Used Car and Truck Expert
Moorhead, MN Fargo, ND Used and New KIA Car Dealer
