7/17/2012 6:57 PM ET|
When not to close a credit account
If you're trying to pay down debt, you may be tempted to cancel your credit cards. Here are 3 situations when it's better to wait.
Fed up with credit card debt and high interest rates? You're not alone, but if you think the best solution is doing away with your credit cards altogether, you may want to think twice before closing accounts.
Canceling a credit card might make sense if you have too many or you can find a better deal, but there are certain cases when it may be better to keep the card. As Kenny Rogers sang, "You gotta know when to hold 'em, know when to fold 'em."
Here are three instances in which it may be better to hold on to a credit card account:
It's a longtime credit card. Long-standing credit accounts look good on your credit reports and help boost your credit score. If you decide you must close a credit card account, choose the newest account to shut down rather than a long-standing account.
You have no replacement credit card. If your credit card company just warned you of an upcoming rate hike, you probably want to tell the issuer to take a hike instead. Before you do that, though, shop around to see if you can get a better deal.
Some credit card offers feature low introductory rates for the first year of an account or tempting deals on credit card rewards. Get that card in place before you cancel your other card. Why? Part of your credit score hinges on your credit utilization ratio -- the amount of credit used compared with the amount of credit available to you. Many experts advise keeping balances on credit cards at no more than 30% of credit limits. Closing an account lowers your available credit and increases your credit utilization ratio, which could hurt your score.
You have hefty credit card debt. If you decide you don't want a card but still owe a sizable amount of money on it, stop running up charges on the account and pay down the debt before you cancel. Under federal credit card regulations, credit card companies must give you a reasonable amount of time to pay off a card if you decide to opt out of the account because of a change in terms. But that credit card debt, along with the removal of the credit, increases your credit utilization ratio.
Finally, bear in mind that canceling a credit card does not remove the record of the account from your credit reports. The account, along with your payment history, stays on your credit reports for up to seven years.
If you decide to close a credit card account, call the company and talk to a customer service representative. Ask that the closure be reported as "at the customer's request," and get written confirmation of the closed account.
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Keeping a card for your credit score is a bad reason. If your paying down debt, you probably are not financing anything, if your not financing anything why do you need a "credit score?" Pay cash, the interest rate on cash is 0% I just bought a car cash and the interest rate was 0% and my credit score didn't matter b/c I paid cash! Whoa, don't buy something you don't have money for (besides a house) - What a CRAZY idea. If you don't know who Dave Ramsey is - Look him up, you'll be glad you did.
Another article that's full of BS. It's a fact that Americans are sick and tired of being ripped off by Credit Card Companies and are turning to buying with cash or going without. I am happy to say i am one of them. I said Adios to my Credit Cards years ago. A debit card is all i carry for ATM withdrawls and some online purchases. If i don't have the cash, i go without. It's a great feeling to not have payments, not be harrassed and to be able to say that i owe no one a dime. It's also a fact ( alarming to those in the credit industry ) that more and more Americans are also saying "Screw the Credit Scores".
Like Johhny Paycheck sang "take this job and shove it", i sing "take your credit and shove it"....i ain't borrowing from you no more.
I payed off and closed my Lowe's credit card due to a confrontation on the part of a customer service rep. & the manager at the
Lowe's in Wood Village, Oregon. I subsequently received a confirmation of my account being closed, and that this information
was sent to the 3 credit reporting bureau's.
Big deal. I've had good credit for the last 50 years, so I'm not worried in the least, it's Lowe's loss, that I opted to close a card
I had had for 11 years. There's always HomeDepot and ParkRose Hardware.
And your Discover Card is way too large
Get a loan on your Visa Card
And pay it off with your Master Charge
No, you do not need credit cards for every single thing if you don't let yourself be led to think that you do because of our society of today. I have lived without a credit and charge card for about ten years and have been so much better off without them. My savings took their place. Even without any steady employment like I had four years ago, I still make sure that I keep something on hand to spend on an emergency. Why use credit cards for those, you will only have to pay it back anyway.
Today, one of my personal email accounts received a message from msn communication. It regarded a poster who not only disagreed with my view on cash use but rammed their opinion down my throat. I admit that I put myself at their level with a mild insult. Believe me, some of the comments on here have been so much worse. However, I should have known better. There's usually the "expert" who thinks they know everything.
There's always going to be some adult that's going to end up acting like a spoiled little child and go running a step further to prove a point that only they go by. I went on here to comment and experience neutral debates, not to argue. My advice to those who don't want to get some comments from these folks through their email is to let msn know not to let any comments go through. I did that myself today.
As one poster boldly remarked on another financial topic (and with a brash adjective to readers), if you want to prove a one-view point, feel free to come over to my house and do so in person. Otherwise, thank you, have a nice day, and please try to remember that what you can consider as facts aren't necessarily everyone else's.
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