Q: I am a college student with balances on my two credit cards -- they both have $1,000 limits (I owe $700 on one and $300 on the other). This month I plan on cutting one in half and paying the balance off on the other.  Is this a bad thing?

A: Caution: Don't cut up either of your credit cards. They are helping you build your credit and closing an account never helps your credit score go up. You just need to manage your use of them and pay down the debt.

You are using 50% of your available $2,000 credit balance, ($1,000) which is right on the border of hurting your credit score. You should concentrate on getting the card with the $700 balance down to $400 as soon as possible by paying as much over the minimum payment as possible. Don't use either card until you get the debt paid off. But keep the accounts open.

Then, for future purchases using credit, use the 60-Day Rule. If you can pay off the purchase made on a credit card with in 60 days or two billing cycles, go ahead and use the card. However, if you won't be able to pay off the entire purchase in two payments, don't use the credit card.

Mike Schiano

Mike's new YOUNG MONEY Radio show can be heard online at www.youngmoney.com/radio.

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