NEW YORK (MONEY Magazine) -
A big stack of plastic can damage more than your wallet seams. More cards mean more temptations to overspend, more chances to have your identity stolen, more headaches if your wallet is lost and more chances to look like a credit risk to lenders.
Solution: Cut them up -- carefully
Three or four cards is plenty. But closing credit-card accounts willy-nilly can damage your credit score, so cancel carefully.
Start by ordering a copy of your credit report from all three credit bureaus (available for $38.85 at myfico.com) so that you can find out exactly what you're holding and check for errors.
Next, decide which cards to keep. You should have a low-rate one for purchases you can't immediately pay off. Another should be a rewards card that you pay in full every month, perhaps from a store or gas station where you shop frequently. If you have a business, you should have a separate card for that as well.
Close the other accounts, starting with the newest ones -- old cards help your credit because lenders like to see a long history of responsible bill paying.
Don't get carried away with card-cutting zeal, though. A third of your credit score is based on your credit-utilization ratio (your total current charges vs. your total credit limits). Ideally, you should regularly charge no more than 20 percent of the credit you have available. An American Express charge card, by the way, does not figure into this ratio.
Investment: It's not enough to cut up credit cards. You must take the time to close each by phone.
The payoff: A better credit score, which will qualify you for lower interest rates on loans.
Problem 7: Portfolio out of wack
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