We have all seen it on TV before: A man goes to pay for an item, opens his wallet, and 20 credit cards drop out in a clear, plastic accordion folder. He then apologizes as he folds the cards back into his wallet.

North America has a love affair with plastic. There are literally credit cards for just about every single store out there: department stores, jewellery stores, furniture stores, stationary stores, etc… And of course, most of them offer rewards! “You will earn 5 points of XYZ Rewards if you buy $20 worth of our junk!”

And do you know why there are so many credit cards? That’s simple. The companies earn a fortune off these cards. Even companies that are near bankruptcy always have a credit card division that is worth money!

How do the companies earn money? “I don’t pay them anything to use their cards AND they give me rewards!” That is true. Most of them don’t charge you a fee and they do offer rewards. They earn their money from people who pay their bills late. And they carry HUGE interest rates on them. I am talking loan shark rates - upwards of 20% for some specialty cards!

You know what people? You don’t need ALL those cards!!

When I was looking at my finances, I decided that I did not need all these cards. So I took a look at what I had in my wallet.

First of all, if there were any fees associated with the card, I cancelled it.

Secondly, if it was a specialty card (ie. department store type card), I cancelled it. I only wanted to carry around general purpose cards.

By the time I was done, I ended up with 3 general purpose credit cards.

Card 1: Credit card with a $500 limit. I use this card for my Internet purchases. It has a nice low amount so that if something happens to that card, there is not much credit available. The Internet is not a safe place.

Card 2: Regular, everyday credit card. This card carries a limit of $3,000. This is the card I use for my normal, daily uses of a credit card - not that I use my card all that often.

Card 3: Emergency fund card. This card has a larger amount of credit available. I do not carry it around. I consider it an emergency fund. In fact, I have never used this card yet.

With all my cards, I never carry a balance. I always pay on time. In fact, I like to pay my cards 2 days early, just to make sure my payment arrives on time. I use my credit cards as interest free loans.

When you have decided which cards you are going to cancel, do the following:

1. Phone the Customer Service number.

2. Confirm that the balance on the card in question is zero. Do not cancel the card while you are making payments on it.

3. Request that your credit card be cancelled.

4. Make sure that it is noted that you requested that the card be cancelled. You do not want your credit report showing that the credit card company cancelled your card.

5. Get a transaction or verification number in case you need to follow up.

6. Cut up your card. Doesn’t that feel great?!

7. Proceed to the next card.

And voila. You have only kept a couple of essential credit cards. That wasn’t so painful now, was it? By consolidating your credit cards, it will be easier to keep track of your credit. And you will only have to pay 1, maybe 2, credit card bills per month.

Now, we will wait a couple of months before requesting a copy of our credit report to give the credit card companies a chance to properly close out your cancelled cards and report this fact to the credit bureaus.

We will look at the credit report another day. For now, look through your wallet and ask yourself, “Do I really need this card?”