Q.
I have five credit cards. Should I cancel some of them?
A.
The key question isn't how many cards you have -- it's how much you spend in relation to how much you pay. If you pay off your bill on time each month and don’t ever get more than halfway to the balance limit, then you’re doing your credit score a favor in most cases. But if having five cards entices you to overspend, think about trimming back. Evaluate which cards have the lowest rates and put those in the keep pile. For any cards in the discard pile, cancel them slowly. Why? Well, your credit score is based on your debt-to-credit ratio, which isn't supposed to tip over 50 percent. That means that if you have five cards with a limit of $2,000 on each card and you cancel three of them, your combined credit limit drops from $10,000 to $4,000. So, if you owe under $2,000, you’re fine, but if you owe more, you could raise some red flags.
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