If your wallet is full of plastic and your mail is full of bills, it might be time to organize your credit cards. In fact, if you are carrying quite a bit of debt, consolidating to a lower-rate card can save you a hefty chunk of change in interest charges. But done incorrectly, canceling credit cards or consolidating debt can cause more harm than good.
Do you need to consolidate?
Decide what you want to achieve with consolidation. Do you want to lower your interest rates? Do you want to lower your monthly payments? Or just stretch out the terms on your loans? If it's one of the last two, tread carefully.
"If you really want a get-out-of-debt-free card, you've got to understand how you got into the mess and fix the mess," says Wayne Bogosian, co-author of " The Complete Idiot's Guide to 401(k) Plans."
"People solving symptoms with debt consolidation are on the verge of making the problem worse," he says.
In short, don't consolidate your credit cards just to charge them all back up again.
Which cards to keep?
If you do decide it's time to reduce the number of cards you have, you should determine your credit needs. How you are using your cards will determine whether it makes sense to consolidate the balances.
Do you have multiple department store or gas cards that you never use? Are you paying a yearly fee for a credit card that allows you to earn miles? If so, do you plan to use those miles? Consider how many points you earn and if it's worth the fee you pay.