Trimming your credit cards: how to decide what to close and what to keep

If you've reached a point where you know you have too many cards and want to trim them to simplify your life or to get your finances under control, think carefully before you act. Some of your credit cards are better than others, so careful consideration is in order.

1. Decide how many credit cards you really need. You may have applied for a card to earn a bonus or gift, but do you really need as many as you have? More than one or two shouldn't be necessary. On the other hand, you don't want to close too many accounts too quickly, since that could - the amount of credit you have compared with the amount you've actually borrowed. If you have a card you don't need but don't want to close the account, don't carry the card with you.

2. Pay off and close high-interest credit cards. Of course, the first thing to pay off is the high-interest cards because they can eat you alive. Take out all your credit cards, and list them (use a code name, not the account numbers, so your list is of no value if it gets into the wrong hands), the balance, credit limit, interest rate, and fees for each card. This will show you, at a glance, what your credit card situation is. Keep an eye on credit cards that have teaser rates coming due because they will go up soon too.

3. Look for high fees. This can be tricky, but read the fine print. The cards you keep should be the best ones with the lowest fees. Depending on your balance, a large fee may have even more of an impact on your bottom line than the interest rate. Though you don't plan on being late, it does happen sometimes, so check out the late fees, too.

4. Close unused accounts, especially if they charge any fees (annual fee or inactive fee, for example). If they have high rates, you'll want to close them anyway. But even if they don't, there's no reason for inactive accounts to show up on your credit report.  Again, be careful about which you close and how quickly you close them so your credit score is not adversely affected.

5. If you have one, keep your credit union credit card. Chances are, the rates are better and the fees are lower on a credit union card anyway.