Question: Should I cancel my high-limit credit cards?

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Credit card being cut in half by scissors

I have four credit cards each with credit limit above $20,000. I use only one of these high-limit cards, along with one or two other credit cards with limits much much lower. My monthly statements are seldom above $400 to $500. My credit rating is above 800. Since I foresee no more need to have such high limit I am thinking of cancelling three of these high limit cards. Is this a good idea? Will this affect my credit rating? Any suggestions?

Response:

Good on you with the 800+ credit scores!  And look how you've been rewarded -- with access to thousands of dollars of credit.

But now you're wondering why you need something you're not using.  Truth is, you may need it some day and the day you need is will be most likely a day that you won't be able to replenish your open credit limits.  It's very difficult to get access to $20,000 in credit if you lose your income.  So, consider it a potential cushion.  I'm a "What-if" kind of gal.  And it may be good for you to know that I'm in the same boat.  

Here's how I handle it:  I have several cards with high limits but only rotate two cards in the whole bunch, making and paying off small regular charges on the other 'dormant' cards to keep them 'alive' and in rotation.  If you don't use the other cards, they could be closed on you by the lender.  

When it comes to closing those cards -- whether you do it yourself or the lender does -- it can bring down your credit score.  A portion of your credit scores (talking FICO scores here - www.myFICO.com - the widest utilized scores) is how much debt you're using vs. how much is available to you.  Closing cards means lowering how much credit you have, raising your debt utilization, even if you pay the cards off in full every month.

But, if you're not borrowing right now or in the near future -- say, for a home -- the dozen or so points you lose may not cost you much.  You're in a great place credit-wise and going from 810 to 785 is not going to move you much down the scale in terms of any future borrowing costs. 

One potential red flag -- identity theft.  If you have these cards open and are not using them, do what you can to keep an eye on them and make sure no one finds your open and unused credit.  This is another reason to put these cards into some regular rotation and regular use, even if, like me, you only put subscriptions on them.  This will keep you peeking into them at least once a month.  Might as well make sure that credit remains yours.

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