Spring is a great time to declutter a closet full of clothes, a garage full of boxes and your wallet full of inferior credit cards.
The average credit card holder with decent credit has more than four open accounts, and Americans opened 110 million new credit card accounts in 2016 alone, according to the latest Consumer Financial Protection Bureau study.
With all that plastic in consumer wallets, not all cards are worthy. At least 1 in 5 credit card customers is carrying the wrong card, usually because fees or rewards are misaligned with their purchasing habits, according to the J.D. Power 2016 U.S. Credit Card Satisfaction Study.
Each credit card should rejustify its place among your payment tools, experts say, for two reasons. First, the credit card business has changed recently, with the curse of higher interest rates and the blessing of fatter rewards. Secondly, you may have changed — your credit may have improved and you may qualify for better cards.
“In terms of spring cleaning, ask whether that credit card still works for you. Is it a card you’re still taking advantage of, or have your needs changed?” says credit card expert Beverly Harzog, author of “The Debt Escape Plan.”
Gather your cards and ask three questions about each:
- Does it charge an annual fee? For cards with annual fees, the bar for keeping them is higher. “An annual fee in itself isn’t a red flag, but you need to re-evaluate whether you’re getting your money’s worth,” Harzog says.
- Do I carry a balance? If you need breathing room to pay debt without incurring high interest charges, you have options. A lower-interest card is one, especially if your credit has improved since you got your current card. Another short-term strategy is transferring the balance to a new card with a long introductory 0% interest period — many offer more than a year. That’s not a cure, but it allows you to pay debt without incurring more interest.
- Is it a rewards card? Old cash-back cards pay 1% back on purchases, but today the better ones are paying 1.5% or 2%, potentially doubling your return. And travel rewards cards have become especially lucrative as issuers battle for high-spending customers. Plus, maybe your lifestyle has changed. For example, travel and dining-out cards may have fit your single lifestyle, but a new family life might mean cash back for groceries and gas is a better fit.
Once you’ve examined each card, use a cleaning checklist represented by the CARDS acronym. You may need to take one or more of these steps:
- Cancel the card,
- Acquire a new one,
- Renegotiate terms on your old card,
- Decommission the card by not using it anymore, or
- Save it and make sure you’re optimizing it
Be mindful of your credit scores as you spring-clean credit cards, especially if you’re considering canceling them. Scoring formulas reward a lot of open credit lines with unused capacity, along with a long history of on-time payments.