Trimming the Fat in Your Credit Card Portfolio
Credit cards aren’t money. You can easily have too many of them. How many is too many? There’s no hard and fast number, but too many credit cards in your credit card portfolio can open you up to having too much debt.
Pay off debt faster with a balance transfer.
What’s more, “too many open revolving accounts” is a reason you might be rejected for new lines of credit you legitimately need. So it’s important to be strategic about opening up new credit accounts. Here’s how to select the right credit cards for your credit card portfolio.
What Do You Need in Your Credit Card Portfolio?
The best way to have the right size credit card portfolio is to build it up from square one. Remember that closing accounts can have a negative impact on your credit score. So, how can you be strategic about filling up your credit portfolio? Here are a few tips on how you can get only the cards you need into your wallet, with none of the fat:
Targeted Rewards Programs
Rewards programs are great, but only if you’re actually going to use the rewards. What do you spend money on? If you travel a lot, a travel card can be indispensable. Travel rewards often include discounts on flights and hotels with multipliers for travel-related expenses. Additional perks may include rental car insurance and roadside assistance.
Piggybacking off of the above, think in terms of spending you do every day. Many cards offer cash back rewards with multipliers for purchases such as groceries or gasoline. Three cents back on every dollar might not seem like a lot, but when you’re talking about regular purchases, a little can go a long way. If you pay your balance in full every month, you may save a significant amount of money.
Having an emergency savings fund equivalent to about six months of living expenses can be a smart financial choice, though that amount can be a difficult . However, having a credit card with a high limit and a low interest rate can augment your emergency fund in the event that you have a major emergency. These are the kinds of cards people freeze in a block of ice to prevent their use, though such drastic measures probably aren’t necessary.
Paying Down Debt
If you have a lot of debt and you want to start chipping away at it, having a card with a low introductory rate can help you with that goal. Be sure to look at the balance transfer fees as well, and always pay off your balance as quickly as you can, preferably before the introductory rate comes to a close. Low- and no-interest cards can act as a sort of DIY consolidation loan, provided that you make inroads toward paying off your debt.
Pay Off Debt Faster with a Balance Transfer.
The most important thing is to make sure you have a reason for every card you carry in your wallet. Your credit card portfolio should not have any accidental additions or anything that’s there “just because.” If every card in your credit card portfolio has a purpose, then you won’t have to trim any fat and you won’t have too many cards.