Illustration of four credit cards on a blue background.
Illustration: Ben Wiseman

Last year, as Jamé Krauter, 44, was looking for the best ways to save money as she planned a family trip to Disney World, she spotted several credit card offers online.

The standouts for her were an airline credit card and a travel rewards card, both promising thousands of bonus points to their new customers and perks such as free checked bags and extra points for Lyft rides.

To reap all the appealing benefits, however, she would have to charge several thousand dollars over the next few months, along with shelling out $95 in annual fees for each card.

Krauter, a fundraising consultant in Bayville, N.Y., crunched the numbers and quickly figured out that the costs for the excursion for herself, her husband, and their three children would easily hit the required spending levels. “It was pretty clear we would come out ahead,” she says.

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They decided to apply for both credit cards. With their excellent credit scores, they were approved. And in December, the whole family enjoyed the Disney World trip, maxing out the perks of the new cards.

Krauter plans to hold on to several other credit cards she uses regularly. One of these cards charges an annual fee, but it pays 6 percent cash back on up to $6,000 a year in eligible grocery purchases. “It’s important to make sure that our money is working for us,” says Krauter, who says she tracks those rewards.

Such careful card monitoring is unusual. Surveys from Bankrate suggest that many Americans are paying less attention to the pros and cons of their credit cards. “I’ve found among my clients that some are still using the same credit card they got as a young adult, perhaps one linked to their college bank or credit union,” says certified financial planner Natalie Slagle, founding partner at Fyooz Financial Planning in Rochester, Minn.

At issue: “Our financial needs change as we move through different life stages, but our credit cards may not change along with them,” Slagle says.

Whatever stage of life you’re currently in, it’s wise to review your credit card portfolio periodically to make sure you’re taking full advantage of rewards, avoiding unnecessarily high fees, and maintaining a good credit score. To help, we have expert answers to five common questions.

How Many Credit Cards Do You Really Need?

It depends on your particular financial situation. During the third quarter of 2020, American con­sumers held an average of four credit cards each, according to the credit bureau Experian, with younger adults (Generation Z) owning just two while baby boomers held five. But research by the American Bankers Association has found that about 25 percent of those cards go unused.

Many Americans can do just fine with only two major credit cards, says Ted Rossman, senior industry analyst at CreditCards.com, who has cut back to two cards himself. So for everyday use, you could hold one credit card that’s widely accepted, such as a Visa or Mastercard, keeping another as a backup in case the first one is lost or stolen or you encounter fraud.

Illustration of multiple credit cards on a green background.
Illustration: Ben Wiseman

For most people, that everyday card should probably be a cash-back product, rather than one that offers you points or frequent flyer miles, Rossman says. That’s because cash-back cards give you money directly, rather than a potential benefit—such as discounts for a particular hotel brand—that you might end up not using.

One option is a rewards card that offers a flat 2 percent cash back on all kinds of purchases, such as Citi Double Cash or Wells Fargo Active Cash. Other cards, like Chase Freedom Flex, may pay higher amounts, perhaps 5 percent, on certain spending categories and 1 percent on everything else. To see what’s most useful for your current needs, you can compare the benefits of various cards at websites such as WalletHubCreditCards.com, and NerdWallet.

Still, as Jamé Krauter’s experience illustrates, some of us can comfortably manage more credit cards, as long as they suit our financial circumstances and spending patterns. Perhaps you shop often at a particular retailer, and its store card gives you discounts and free shipping. If you travel regularly, an airline card with perks like early boarding, waived baggage fees, and mileage bonuses may be useful. A close look at your credit card statements may well help you decide.

Should You Take Advantage of Offers for New Cards?

Maybe. You may have noticed a recent flood of mailings or online pitches for new credit cards—certainly a turnaround from the early days of the pandemic, when issuers were pulling back.

Some of these cards may look pretty tempting. Recently, for instance, Chase’s Sapphire Reserve credit card offered 50,000 sign-up points and a $300 annual travel credit, while the no-fee Wells Fargo Active Cash card touted a $200 sign-up bonus along with 2 percent cash back on all purchases.

But be sure to scrutinize the terms. “You need to understand how you can qualify for those bonuses, since it may involve spending thousands of dollars within a few months,” says Matt Schulz, chief industry analyst at LendingTree, which connects people interested in borrowing money with multiple loan companies. Check fees, too. Chase Sapphire Reserve, for one, charged a $550 annual fee plus a $75 fee for each authorized user.

You might also see offers for zero transfer cards, which allow you to shift debt from a high-interest card to one that’s far lower. Some card issuers were recently promising no interest for as long as 21 months—a boon if you need to rebuild your savings or pay off debt.

To qualify for most of these zero balance cards, however, you’ll need impressive credit, perhaps a credit score of 700 or higher. And remember, “if you decide to do a transfer, just be sure you will be able to pay off that balance,” says Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling, a nonprofit group.

Does It Make Sense to Cancel Credit Cards You're Not Using?

Not necessarily. Like many people, you probably made some recent changes in your spending habits. Given the past two years, you may certainly be traveling less frequently and you might not have pulled out that high-fee travel credit card in many months. Or perhaps you stopped shopping at a particular retailer you used to frequent, and have shoved its card into a drawer.

Or one or more of your credit cards may have switched up what they offer you. Card issuers frequently adjust their benefits, cutting back cash-back rewards for certain spending categories or hiking interest rates.

Illustration of a credit card cut into pieces.
Illustration: Ben Wiseman

So should you ditch the cards you rarely use? If you’re paying more in fees than you’re receiving in benefits, canceling an out-of-favor card might be reasonable. But it’s often best to keep it, says John Ulzheimer, a credit expert.

Here’s why: Closing a card not only reduces the line of credit available to you but also lowers your credit score. Shutting off the card’s credit line raises what’s called your credit utilization rate, which is the percentage of available credit you use. This number is important, accounting for 30 percent of your credit score.

It’s true that after a cancellation, as long as you pay bills promptly, your credit score will rebound—though it may take months or longer. Thus, it’s important to avoid canceling a card if you plan to apply for a mortgage or loan in the next few months, says Bill Hardekopf, senior industry analyst at Money Crashers, a card comparison website.

Rebuilding your line of credit after a cancellation can also take time—unless you replace it with another card with an equivalent credit line. So “it generally makes sense to keep that credit line open in case of emergency, especially if you’re paying a low or no fee,” Ulzheimer says.

One option: Instead of canceling, you might ask the card issuer about switching to another of its offerings, one that better fits your needs, such as a no-fee travel card. Make sure the swap is categorized as a product change, which allows you to keep the same credit line and won’t affect your credit score.

Can You Avoid Your Credit Card Being 'Closed'?

You can cut the odds. In 2020 and 2021, many Americans had a card canceled or their credit limit reduced out of the blue. While there’s no foolproof way to dodge such cutbacks by credit card issuers, a couple of strategies can help make it less likely.

For starters, it’s important to note that many of the cards that issuers closed, at least in 2021, were rarely utilized, or dormant, to use industry jargon. So make sure to use each of your credit cards at least two or three times a year, even if it’s just for small payments. Or set up these cards to make automatic monthly payments, perhaps for a streaming service, Schulz says.

Keep an eye on how much of each card’s credit line you’re using, too. Some card issuers might become alarmed if you begin maxing out a card you typically don’t use much, because this could be a sign that you are experiencing some financial difficulties.

It’s also helpful to keep your credit utilization rate to less than 30 percent. If your overall credit limit is $30,000 across all of your cards, your total balances should be under $9,000 in a month.

And the lower your utilization rate, the better, Ulzheimer says. Cardholders with credit scores of 750 or higher had median credit utilization rates of 10 percent or less, according to FICO, a credit score and data analytics firm.

What’s the Simplest Way to Track Your Spending?

Use the tools you’ll find on your bank’s website or app to stay on top of your accounts. These allow you to put various alerts and notifications in place.

If you’re concerned about staying below certain credit limits, for instance, you can set up balance notifications, which tell you when your account balance exceeds a certain amount. Or you can enable spending alerts for purchases over a specific dollar figure. A payment-due alert will provide a heads-up a few days in advance of that deadline.

You might also consider opting for a third-party financial app, such as Mint, which connects with your credit card account and provides you with a big-picture view of your finances.

How to decide? Use whatever makes it easiest for you to manage your accounts, Hardekopf says.

Another potentially helpful move: Turn on the auto-pay feature for your credit card bills, to make sure that you never miss a payment deadline. You can choose to auto-pay your bill in full each month. But if your finances are less certain, you may want to rely on payment-due reminders and then pay as much as you can on time.

Whether you opt for auto-pay or payment-due reminders, it’s important to examine each monthly statement closely for potential billing errors and fraudulent charges, Rossman says. Also, periodically check over your credit reports. (You can get your reports free of charge at AnnualCreditReport.com.)

This not only will help protect against rip-offs but also ensures that your credit history is accurate and that you’ll be able to qualify for any credit cards that best suit your financial needs.

Editor’s Note: This article also appeared in the May 2022 issue of Consumer Reports magazine.