I have seven credit cards. Should I cancel any of them?

Renee asks: I am graduating in June 2010 and in the course of four years at school, I managed to make a mess with credit cards. As of today, I have seven cards, all which have carry very high limits. I’ve never paid late. I have two Visas, Discover, MasterCard, Macy’s, Express Fashion, and WalMart cards. When I graduate, I intend on paying off all my credit card debt immediately (hopefully within two months) so that I can then take care of my school loan debt.

When I clear off my credit card debt, should I cancel any of my cards? If so, which ones? I know that canceling a card makes a negative impact on my credit score, which is currently ranked as good. I will probably have to take out loans for grad school in 2011 and maybe for when I make some kind of living arrangement since I will be on my own. What should I do?

Hey Renee,

Sounds like our college experiences with credit cards are pretty similar. Obviously (as it sounds like you already know), how quickly you can pay these cards off is more important that whether you cancel them or not. But you’re right that you don’t need seven cards and it’s best to get rid of the temptation to spend on them by getting rid of a few.

You’ve got good timing with your question because I’m working on a two-part article that deals with just this question: Radically Re-Thinking Credit Cards.

What I recommend is that you cancel all but two credit cards. The ones you want to keep are the credit card you have had the longest (the first one you got), and the credit card with the highest credit limit. But in your case, I would cancel all of the store credit cards (WalMart, Macy’s, and Express) even if one of them was your first. These cards tend to have the worst interest rates and don’t do anything other than help you spend more money than you should at those particular stores.

After you close those accounts, look at the four other cards you have. Pick the oldest one and the one with the highest limit and cancel the other two. Forget about what rewards they offer and even their interest rates. Once you’re out of debt, the goal will be never to carry a balance again, but you also don’t want to be spending with a card just to get rewards.

You’re right, your credit score may take a small hit when you do this, but by keeping the oldest card and the highest limit card you’ll minimize damage to your credit. If you want, read the second part of Radically Re-Thinking Credit Cards (which I’ll publish tomorrow) for more about why I recommend this and how to best use those two cards once you’ve canceled the others.

Good Luck!

David @MoneyUnder30