If there is any kind of sound financial advice available these days it is this: renegotiate your credit terms and then pay off your open accounts. Once this is done, then you can start to worry where to put all that extra money you are not paying in interest rates every month. The average number of credit cards held by Joe six pack is four; but one in ten Americans hold ten or more credit cards. Thus, according to the law of averages, there will be many folks who hold fewer than four cards and a few who hold many more.
Whatever your circumstance, it is important to renegotiate your credit terms. You can do this by calling the credit card company and haggling your interest rate from (the average) 18% to a more reasonable 10-12%. If you have a sterling credit score and a good history with the company, you may very well be able to do this. But, if you have missed payments and are having trouble staying on top of your bills, you may want to consider a credit counseling service. These places will do two things for you: 1) renegotiate you interest rates and 2) effectively take your cards away from you. If the second point sent chills down your spine, consider the wider economy for a moment.
Even the most optimistic of the Wall Street crowd are projecting a dismal next few years characterized by rising unemployment, more competition for jobs, lower wages and an historic dip in demand. In a word: recession. More levelheaded commentators are emitting far darker prognostications for the next decade or so. And the paranoiacs are certain that this is the end of the world as we know it. Whatever the case, things will be getting progressively more difficult for the average person, and the last thing we need is the vampiric siphoning off of what resources we have to pay off the interest of our credit cards (indeed the minimum monthly payment goes primarily to pay interest, which means that, even if you never use the card again, you will be carrying the balance for many, many years to come).
I recommend credit counseling. My wife and I used credit cards to make up for the shortfalls in income during our grad school years. We racked up a truly impressive mountain of debt and, about five years ago, we went on a credit diet. We surrendered our umpteen credit accounts to a trusted and reputable credit counseling service and, for a small monthly fee, they renegotiated our interest rates and set a monthly payment rate for us. So, for the last five years we have sent them between $500-$700 a month (the payment amount goes down as you pay off accounts) and they redistribute the amount to all of our creditors. As we pay off accounts, we can often keep the credit lines open--but not to use! Instead we do this to boost our credit score (yes, it's crazy, but you have to have open credit lines to get a good credit score--it seems more sensible that if you have a certain income and less credit extended to you, there would be less risk of getting into trouble over-extending yourself, but there it is...). Now we have paid off 2/3 of our original debt. It is very satisfying to watch account after account drop off the list. In addition, we are very careful now when making any credit purchase (an extremely rare occurrence).
So, my suggestion is that if you find yourself slowly sinking under the weight of your credit card bills, renegotiate or have a service do it for you, and then get out the scissors! Take a deep breath, tighten your belt and start living within your means--it won't be nearly as bad as you imagine and you will begin to develop a little of that quality we will all need in the coming years: restraint.
Check out The Motley Fool website for helpful tips for getting out of debt: http://www.fool.com/personal-finance/credit/index.aspx
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