How to audit your credit cards

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We've all been there. One day you suddenly notice how bulky your wallet is and it becomes uncomfortable in your pockets or hard to stuff in your purse. The culprit is easy to find - your burgeoning collection of credit cards, some of which you never even use. Let's think through which cards you keep and how to maximize the usage of the ones you keep.

Drop those unused cards with annual fees

Did you find some airline card that you never use in the back of your wallet, and recall that it has an annual fee of at least $65? This is a no brainer as this card provides no value to you but you're paying a regular fee. Consider potentially downgrading the card to a version that has no fee if you want to keep it for emergency purposes or to potentially retain its no-foreign-transaction-cost benefit. The added benefit of keeping a no-fee card is that you continue to carry forward your credit history with that card. A longer credit history is always better than a shorter history (all else equal) because credit bureaus like to see that you've had longer relationships with your banks. So you can increase your credit score just by maintaining your account. But if you can't downgrade or avoid the fee, then it's time to call the number on the back, cancel the card, and discard it.

Re-evaluate your spending habits

Years ago, you were probably excited to use that new card that got you additional cash back on gasoline. But since then you've moved to the city, ditched your car for public transport, and travel more often for work. You realize your spending on gas is zero, but your spending on Ubers, flights, and public transport make up half your monthly budget. It's time to realign your spending with your cards. Consider applying for a card like the Chase Sapphire Preferred which gives you bonus points on a wide range of travel spending. The point is, your spending habits might have changed over the years, and it's always good to check that your credit card rewards your spending.

Align your rewards

Chase Sapphire Preferred® Card

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With its sign-up bonus having just jumped to 60,000 points when you spend $4,000 in the first three months, now's the time to add the Chase Sapphire Preferred® Card to your wallet. Even better, future travel and dining purchases earn 2x points per dollar spent and it includes valuable travel benefits like primary car rental insurance.

Audit your statements

If there is a card in your wallet that you haven't checked on in a while, now is the time to pull up some recent statements. There's a possibility that when you first got the card, you signed up for some subscription service, and continued to auto pay the balance on the card even if you stopped using that subscription. That subscription may have been a small amount, but now you know to cancel it. In general, audit recent statements of all your credit cards, especially the ones you don't use, at least once every 6 months.

Get organized

If you'd like to go above and beyond, consider creating a spreadsheet to organize your credit cards. Insert the information of all your credit cards in a table, evaluate the rewards they offer you, and then create a column that decides whether you should keep, downgrade, or cancel. That way, you have all your options listed neatly in one place so that you can easily make a decision on each card. Alternatively, consider using a 3rd party application like AwardWallet. It not only helps you keep track of all your credit cards, but also points, miles, and cash back that you're earning regularly.

The bottom line

Ensure you understand how each credit card functions in your wallet. Consider canceling or downgrading cards that offer little to no value to you, especially if they require an annual fee. If your spending habits have changed, consider applying for a new card. At the end of the day, staying organized can help you avoid paying fees and get more out of the cards you want to use.