While there are two methods of paying off credit card bills the quickest method to pay off all your credit cards involves paying off the credit card with the highest interest rate first. You started deciding how much money you want to put towards paying off your credit card debt every month. Then you pay the minimum on all your credit cards and take the extra amount of money to pay off the balance on the credit card with the highest interest rate. Once you manage to pay off this credit card you’ve shifted attention to the credit cards that has the next highest rate of interest diverting all the money that you are paying on the trust credit card to the second credit card. So the money that you pay on the next credit card will be the total sum of money that you were paying on the first credit card loss the minimum payment that you are already making on it. In this way you go down the hierarchy of interest rate.

While this method is the fastest way to pay of all your credit card debts and save the maximum amount of money in interest and financial charges it may feel like it is the longer route to take. Sometimes the credit card with the highest interest rate may also be the credit card with the highest amount of balance. This means that it made me quite a while before you finish paying off your first credit card completely. This can result in making many people feel that it is a slow process. But actually it’s not. While dealing with a credit card that has a high interest rate as well as a high balance may take longer the process will quicken dramatically as you move down the hierarchy off high interest rate credit cards.

Another popular method of paying off your credit cards is the debt snowball method which involves paying off the credit card with the lowest balance. This method is usually a little is slower and involves a higher cost although it provides quicker results since you will be able to pay off a credit card with the lowest balance faster.

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If you look at the number of credit cards that you have and try to decide whether you have too many credit cards do you answer may not be a simple one or one that applies to each in every person. Before you attempted to close down active credit card accounts you should know that closing and opening credit card accounts affects the credit score. Credit score uses information present on your credit report regarding the various credit cards you use as well as further information. What is the best number of credit cards that you should have is generally decided upon the impact that the credit cards are having on your credit score. There are however other factors that you can take into consideration as well. Listed below are a few of the general points that you should put through a checklist in order to determine what you should do with your credit cards.

Debt to Income Ratio

generally lender will measure your debt to income ratio why calculating what your total limit of debt would be if you were to Max out all your credit cards and your current income level. This means that the more credit cards you have the higher will be your debt to income ratio. With person who has a high debt to income ratio a lender may be more hesitant to extend further credit. This is because the lender may believe that you already have enough line of credit available to you which you could use to get yourself under a lot of debt. Extending you a further line of credit puts the lender at risk of losing money if you are able to handle the debt and default on the credit account.

Credit Utilisation Ratio

credit utilisation farms about 30% of your credit score. It is the ratio between the two credit that you utilise on your credit card and the total credit limit available. Typically the credit utilisation on any one credit card as well as all the credit cards jointly should be around 30% of the total credit limit. Having many credit cards is you the opportunity to increase your credit utilisation ratio by charging a high balance on the credit card. However, this does not mean that cancelling a credit card will help your credit utilisation ratio. In fact closing a credit card account will increase your credit utilisation ratio because the overall credit limit available to you will decrease with the cancellation of a credit card.

The two ways of managing your credit utilisation ratio is not only to have only the number of credit cards that you need but to also keep the balance on each credit card down to about 30% of the credit limit.

Mix of Credit

the credit score considers another factor that is known as mix of credit accounts in order to calculate the credit score. This forms about 10% of the total credit score calculation. So credit cards are not the only thing that is going to affect your credit score. Having three credit cards may have the same impact on your credit score as having 10 credit cards. Cancelling one or two credit cards may not have that much impact on your credit score if you have other positive information present on the credit report and especially other credit accounts of different kinds such as a home loan, personal loan, automobile loan etc.

Difficulty in Managing Credit Cards

as mentioned in the first paragraph credit score is not the only criteria by which you should judge whether you have too many credit cards or not. If you have a problem managing multiple credit cards then maybe it is time to downsize. Having more credit cards will make it all the more difficult to keep track of your monthly payments, interest rate etc. If having too many credit cards is proving hard to manage where you run the risk of defaulting on a credit card by missing a payment and forgetting to pay, then it may be better to cancel the extra credit cards that you do not use or need. Makes managing credit cards because there are too many of them may have an impact on your credit score if you happen to mess a payment. Since a single late payment can stay on the credit history for a period of seven years you can avoid this negative information by having just the number of cards that you can manage easily.

How many credit cards is enough

You can build a good credit history by using 1-3 credit cards. After that, you need to determine your own requirement. You should not have many credit cards if you are going to use them to incur debt. Have credit card for the purpose of utility and need.

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After years of only getting offers for bad credit loans and credit cards for bad credit, more positive mail is finally starting to pour in. You’ve been working hard, using free credit reports to guide you. Those efforts have paid off.

While this is certainly reason to celebrate, an improvement in credit report scoring is no reason to let your guard down. As your track record improves, it’s even more important to tread with care and take the time to compare credit cards.

When offers come in, even if they are for secured credit cards, it is a good idea to carefully review the bottom line details. To compare cards and get the best possible one to help you in your quest to keep building up your rating on your free credit report, make sure to look at:

The interest rate – This is a biggie that most people do remember to do. You want to obtain the lowest possible interest rate and make sure it’s not just an “introductory” rate. Ideally, a solid low rate will last as long as your good payment history does.

The penalties – Some credit cards have very steep penalties for paying late or missing a payment. In some cases, that low interest rate can double, triple or even more if you are not on time. In a perfect world, you want a card with reasonable penalties.

Reporting status – Not all secured credit cards, for example, will offer reporting to the credit bureaus. To help rebuild or build credit, you want one that does. It probably isn’t worth your time to accept a card that won’t have a positive impact on your credit report.

If you’ve spent a lot of time rebuilding credit to enjoy a good free credit report rating, don’t wreck it by jumping too fast on offers. Take the time to compare credit cards to better position yourself financially.

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