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credit & debt

Should I Activate New Credit Cards?

Tips to manage your credit score and debt ratios.

Q. I have a balance of about $10,800 on an American Express card that has a limit of $11,500. I also have three other accounts that I haven't used in a while, with a total credit limit of $6,800. When those cards expire and the issuers send me new ones, should I activate them or allow the accounts to expire?

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Go ahead and activate your new credit cards. With that $10,800 balance, you are already using 59% of your total available credit of $18,300. That's too high a percentage. Scott Bilker, founder of Debtsmart.com, recommends that cardholders use no more than 50% -- and as little as 30% or less -- of their available credit, if possible. If you cancel the cards, your usage will shoot up to 94%, which will lower your credit score.

Plus, some card issuers raise your interest rate when they see that you are using too much of your available credit. If that were to happen, you wouldn't have the option of transferring your balance to another one of your existing cards, and it might be hard for you to qualify for a new low-rate card.

After you've activated your new cards, stow them in a drawer to avoid being tempted to use them until you've paid off a good chunk of the amount you owe on the American Express card. Then use each of the new cards once a year to ensure that the issuers don't cancel them -- and pay off the balances immediately.

Get more advice: Go to Credit and Money Management

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