A credit score primarily affects your credit card's Annual Percentage Rate (APR) and approval chances, while your credit limit is influenced by factors such as income and credit score.
Please note that the credit utilization rate is the ratio of your spending to your credit limit. It is generally recommended to keep your credit utilization rate between 30% and 50% for a healthy level. If your utilization rate exceeds 50%, banks or financial institutions may question whether you are facing financial difficulties, which could negatively impact your credit rating. However, most people’s credit utilization rate is usually only a few percent, and if you have too many credit cards, you should consider canceling some to reduce the chance of accumulating debt.
When you have only two or three credit cards, and your monthly spending is large, canceling cards randomly will significantly increase your credit utilization rate. For example, if you have Credit Card A and B, each with a credit limit of HK$20,000, and your average monthly spending is HK$12,000, your credit utilization rate would be:
$12,000 / 40,000 = 30%
If you cancel Credit Card A, your credit utilization rate will increase significantly to:
$12,000 / $20,000 = 60%
Therefore, you should compare credit card offers and focus on applying for one or two credit cards to avoid negatively affecting your credit score by canceling cards.