You’ve paid off the cards. Now what?

Matt Jabs of Debt Free Adventure has paid off his credit cards. But now he’s wondering how to proceed.

Simple answer, you say? Cut them into a thousand tiny pieces and close the accounts. Or how about keeping one for emergencies only? And what about the impact to your credit score?

After much thought and consultation with other personal-finance bloggers, Matt came up with three possibilities and asked readers to vote. Each has drawbacks. We wonder, what do you think?

Actually, Matt paid off the credit cards with a loan from Lending Club two months ago, after all three of his card issuers raised their interest rates. "I'm loving the fact that while I still have to pay interest, I'm paying it to individuals rather than corporate credit card banks," he wrote at another post.

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The three options:

• Plan A, from Matt:  After paying them off, Matt shredded two cards and kept one, but didn’t close any accounts. "I haven't closed them because the word on the streets is, a paid-off credit card will increase your FICO score -- but a closed card will not," he wrote. Good point. The downside is that the issuer of the non-shredded card just instituted an annual fee.
• Plan B, from reader "Steve in W MA": Steve uses a variation on the cash envelope budgeting system. If a purchase falls within the budgeted cash on hand, he pays with a credit card and transfers an equal amount of cash to the "Visa repayment" envelope. Upside: "I still spend at my predetermined budget limit, but I am getting the 1% back (soon to be 5%)," Steve wrote. Possible downside: Not everyone has the willpower to keep their credit card spending in check.
• Plan C, from "Mr. Not the Jet Set":  He wrote, "Burn 'em. BBQ 'em. Whatever! Ditch the credit cards and their never-ending schemes. Then come back in a month, three months, six months -- tell me if you really miss it. … It’s a much simpler life." Downside: Cards do come in handy from time to time, particularly in an emergency situation.

What's your vote? Last time we checked, "Close 'em, shred 'em, and forget 'em!" was ahead with 51%.

Related reading:

• 20 credit cards that pay you back
• Weird stuff that hurts your credit
• Huge debts, paid off fast
• Is there a statute of limitations on debt?