What to Do if You Have Too Many Credit Cards?

That’s a question many of us grapple with. Do we own too many credit cards? Should we cancel some of the cards? If yes, which cards to cancel? What about the discounts or cashbacks you might miss out on? Or should we just keep the cards even if we don’t use them? What are potential drawbacks? But how did you end up with so many credit cards in the first place? That was never the idea, right?

The Number of Credit Cards Builds up over a Time

You applied for your first credit card when you took up your first job. Then, a salesperson from a foreign bank pitched you a credit card. You apply for it too. Thereafter, you figure out that your favourite shopping app offers discounts/cashbacks on a certain credit card. You add that too. And then your favourite app keeps changing.

Gradually, over the years, you end up having 4-5 or even more cards. Even though you may not be using all the cards, you still own them. And that can be messy.

How Many Credit Cards Are Too Many? What Are the Problems?

No fixed answer but 2-3 credit cards is a good number.

4 or more cards will be difficult to manage. You must remember the statement dates. If you skip the payment for any reason, you incur a penalty and pay a high interest rate on the balance amount. This can also affect your credit score adversely.

With too many credit cards, there will also be higher cumulative credit limit available which if used irresponsibly can move you closer to a debt trap. It is difficult to keep (mental) track of your monthly expenses if you spread your expenses across multiple credit cards. And that’s usually how you get into the financial mess.

Some of the credit cards have annual fees too, which is an unnecessary expense.

With too many cards, it is also possible that you may lose one of these cards without you even realizing it, which can then be misused. Or your bank may levy charges on your credit card for some reason. Since you have NOT been using the card, you may not notice the charge and let it balloon through service charges and penalties. You may contest the charge with the bank and come up trumps but you know it is a long drawn out process. Note that the bank won’t let you close the credit card if you have pending charges on the card.

What Should You Do?

Close the cards with an annual fee that you don’t use much. That’s a low hanging fruit. Next to go are the free credit cards that you don’t use much.

Retain those credit cards where your favourite stores/restaurants/shopping apps or websites usually offer discounts or cashbacks. Or the credit cards where you are quite happy with the service. Remember it is NOT just about discounts and cashbacks. A credit card may not offer you discounts but may offer much wider acceptability at the places you visit or travel to (or airport lounge access). You might want to retain such cards too.

Cut down the number 2-3. And be content with your choice.

Do not make the mistake of NOT cancelling the credit card you don’t use. You might think, if you are not using a card, you can just let that be. Why take the pain in cancelling the credit card? Not the right approach. There could be fraud that goes unnoticed. Remember your liability in a credit card fraud depends on how soon you report the fraud to the bank. If you are indifferent to communication from a particular bank, you might miss out on such information.

Therefore, once you decide not to use a card, approach the bank with a formal cancellation request.

What about the Deals You May Miss out On?

Yes, that is possible, but you can’t do much about this. Such tie-ups keep changing all the time. This month, the app/website/store offers discounts to card holders from ICICI Bank. Next month, the discount may be available to HDFC bank credit card holders. You can’t hold credit cards from all the banks to max out savings from every deal.

Thus, be content with what you have. Accept the chance that you won’t have the credit card on which the app is offering discounts.

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