Out of 11 cards, which 7 do I cancel?

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Question Dear To Her Credit,
I just refinanced my home and want to use the proceeds to pay off all my credit cards to a zero balance.

When I do this, I want to get rid of some extra credit card accounts. I have department store credit cards that I don't use. I want to cancel four department store cards and only keep my Macy's card. I also have six Visa and MasterCards, one of which I applied for and never used. I would like to cancel at least three of them.

If I pay them to a zero balance and close all but one department store and three credit cards, will this hurt my credit score? I have a score of about 780. -- Rebecca


Dear Rebecca,
Figuring out exactly how your credit score could change if you close extra credit card accounts can be confusing, because some of your proposed actions would raise your score, while others may lower it.

For example, paying off the accounts should raise your score by improving your credit utilization ratio -- your total debt compared to your available credit. Lower is better. But canceling several cards reduces your total available credit, so if you run up a balance again, you will raise your credit utilization ratio faster, and that will hurt your credit score.

On the other hand, closing accounts you have had a long time may eventually lower your score. You get credit for having accounts a long time. However, any account you close now will remain on your credit reports for 10 years, so it's not like that positive account history would disappear overnight.

The most important thing to consider when deciding whether to close or keep cards is to look at your ideal long-term financial picture. That's far more important than a temporary 5 or 10 point bounce up or down on your credit score.

Looking at your situation, you're starting from a position of strength, with an excellent credit score of 780. You pay your bills, and you have built up a good track record of handling credit well.

Five department store cards and six Visa and MasterCard accounts are a bit much. Closing at least a few of them would simplify your life and reduce your exposure to identity theft.

Closing cards would also cut down on the temptation to run card balances back up after you pay them off. Some people, with excellent intentions, have refinanced their homes to pay off credit cards, and it hasn't gone as planned. They now may owe more on their homes, but their credit card balances start to go up again. It isn't long before they are actually further in debt. Don't let that happen to you!

Macy's is a good card to keep -- I have one myself. The extra discounts and rewards work well for me. Now, to decide which and how many bank cards to keep.

It's possible to get along with one Visa or MasterCard account. However, things can go wrong with a bank card, usually at the most inopportune moment. You could be traveling, and the bank detects unusual activity and freezes your account. Someone could fraudulently use your account, with the same effect. If you have a second card, you're still in business. Otherwise, you'll have to call the bank right now and try to straighten it out. That's not what you want to do when you're standing in a hotel lobby, wishing you could check into your room.

The unused bank card should probably be the first to go. It's not helping your credit score much, because it isn't showing a recent track record of spending and making payments. You must not be excited about the rewards, or you would have used it by now.

I'm curious how you ended up with six bank cards -- whether it was for low introductory interest rates, rewards or perhaps more available credit. Whatever your initial reason for opening the cards, you don't need them now. Interest rates don't matter when you pay your balance off every month. You don't need as much available credit that way, either. And too many rewards cards can dilute their earning power when you spread your spending among several different cards.

For purposes of your credit score, try to keep the bank cards you've held the longest. Say you have Card A and Card B. Card A has great rewards, but you've only had it for a year. Card B has less interesting rewards, but you've had it for 10 years. Unless you absolutely love the rewards on Card A (say, you almost have enough rewards to get a free ticket to Hawaii), you're better off with Card B.

If you think you may carry a balance in the future, of course you'll want to consider the interest rate. Once you have these cards paid off, however, I hope you resolve to never carry a balance again. If you work on your long-term financial goals, and always pay your credit cards and other bills before they are due, your credit score will be just fine.

See related: Closed accounts affect your credit score, but maybe not how you think

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Updated: 12-09-2018