Cancel Your Credit Cards

[yellowwood]

Good article in "Smart Money." Reasons to cancel your credit cards.
I have one credit card that I use only for trusted online sites or for purchasing air fares.
http://finance.yahoo.com/banking-budgeting/article/113093/reasons-cancel-credit-cards-smartmoney?mod=bb-budgeting

If I can't afford an item, I don't get it. I never carry a balance.

[seabeyond]

1. one card. i use it to pay everything. and pay off at end of month.

if i cant afford something, then i dont buy.

[NYC_SKP]

2. Ditto. One card, and I make payments more than once a month.

This is how to have a credit score of 851.

I charge a lot for work and usually make two payments/month in case there are big charges, to keep the balance low.

My grandfather and many of his time wouldn't even buy a car unless they could pay cash.

K/R

[seabeyond]

6. i had refused to use cards for years. then my wallet was stolen. card easy to deal with

banks and checks were a mess for a year. now i carry no purse and stick card in back pocket. but what i really like is every month i see how much money is going out and for what. i dont have to do any work. i see the number and say, spent high, spent low, spent normal and gives me an idea if i need to cut back the next month.

[hfojvt]

17. I get rebates with my card

1% for regular purchases, 2% for restaurants and 5% for gasoline (at their chain).

It works out to maybe $50 a year, but I don't use the card on local small businesses. THe card fee that the mechant pays is going out of town instead of staying with that local merchant. So I will use cash for the rare purchase from a local merchant.

But $50 a year, or $500 for the next ten years, and it is not costing me anything.

I also made some money off of balance tansfers, but the offers I get in the mail are not that good any more. They all come with fees.

My all time favorite was the no-fee balance transfer of 3.9% for the life of the loan. So I borrowed $3,000 and paid it on my house, where I was paying 5.5%. So it was like I got paid 1.6% to borrow that money. If only I could have borrowed $20,000 at that rate. The funniest part of it was that the bank that held my mortgage and the bank that gave me the credit card offer were the same bank!

[seabeyond]

19. ha ha. i havent looked intot he part of loan. i will have to read the small print

we just did 17k on new windows. that might have been interesting. we do have 6 months free interest with lowes, though.

we get frequent flyer. hubby bought a flat screen with it a handful of years ago. we have enough now, should be able to buy something. kinda fun.

[xmas74]

45. I only use cash or my debit card.

This has come back to bite me, since the lack of a credit card and loans has actually lowered my score.

I don't want a card-I personally believe that they lead to trouble-but am feeling forced to get one. I need to get that score up a bit more so I can eventually afford to buy some land.

[Obamanaut]

3. We got rid of all but one of ours, and do as you said. We voted against

raising our debt/credit ceiling. It's working well at our house.

[Ragnarok]

5. Word.

IF ya don't got the cash, don't buy the stash. Try telling that to our State and Federal governments!

[noamnety]

4. I'm glad I have two!

Last month one of ours was used for some fraudulent charges and we had to cancel it. I was out treating people to dinner in return for a favor, and the card was declined - I was trying to use it as the husband was home on the phone with the bank cancelling it.

I was pretty happy I had a backup one.

And yes, we pay them off in full each month. As for it being easier to budget if you aren't carrying a card, that's not the fault of having credit, it has more to do with a person's mindset.

[ProgressiveProfessor]

11. I carry two as well

My wife had a couple of store cards that got her discounts, but all were paid off monthly.

[DrDan]

7. you have to be careful in doing so - it changes your credit rating picture

could give you a higher debt ratio which lowers your rating.

So do so with care. It could end up costing you in the future if you are looking to make a big purchase using credit (car or house).

[pipi_k]

15. Yep, that's why I don't use one of mine

only once a year. I keep the account active and then if/when I want a home or car loan, it shows that I have credit available that I use but don't overuse.

It's a Chase Bank card, and I would rather cancel it, but realize that doing so could affect my credit rating, which is very good (high 700s to low 800s).

[DrDan]

29. exactly the right strategy imo - I do the same

[MadHound]

51. I have no credit cards, never have had any,

Yet my credit rating is excellent, and I've never had any problems getting a home loan(I pay for my cars in cash, so that point is moot).

It is a myth that you need credit cards in order to have a good credit rating.

[DrDan]

52. nope - not a myth

Credit-utilization ratio is key
First, canceling a card could upset your credit-utilization ratio, the second most heavily weighted category in Fair Isaac's credit scoring algorithms. For example, assume you have three cards with total available credit of $20,000. Assume further that your outstanding balances total no more than $6,000 of that available credit at any one time. Since creditors like to see a credit-utilization ratio of 30 percent to 35 percent or less, you're in good shape. Now, assume that you cancel a card with a zero balance and a $10,000 credit limit. Suddenly, your utilization ratio jumps to 60 percent, and your credit score drops.

http://www.bankrate.com/brm/news/cc/20061114_cancel_card_credit_scorea.asp

[MadHound]

55. Then please explain why I have a great credit rating,

A score well over seven hundred, without having any credit cards, ever.

Sorry, but this sounds like so much bullshit designed to scare people into keeping their credit cards when they really don't need them.

[scarletwoman]

65. I've never had one either. Somehow I've managed to get by just fine.

Unlike you, I actually don't know my credit score, in my 61 years, I haven't been in any situation that required me to know.

I mainly attribute this to that fact that ever since I was a kid (raised by depression era parents), I saved money like crazy. Except for one time, all the cars I've bought have been with cash. The three houses I've bought so far in life were all contract-for-deed with 10% down - which I paid in cash. I had the cash because I saved it ahead of time.

I live as small as I can, and put as much money in savings as possible - usually 20% to 30% of my paycheck. I always have a cushion when the inevitable major car repair or appliance replacement happens. I pay in cash and then rebuild my savings account as quickly as I can.

I do have a debit card, and I've booked numerous hotel rooms and plane tickets with no problem.

I may be naive or ignorant, yet my old hippie method of avoiding the "straight" world has worked just fine for me for all these years. At this time my little house on 10 acres of woodland has been mine free and clear for 3 years. All I have to pay are property taxes, which are no problem - I already have the money set by.

And lest anyone think I'm independently wealthy, I make just a few cents more than $14 an hour at a 40 a week job.

In the years I was raising my two kids, I never made more $10,000 a year. And I was a single mother for all but 9 of those years.

Threads like this make me feel like I live in a different world than a lot of DUers. Which is fine, I set out to do exactly that, on purpose, many decades ago.

sw

[lpbk2713]

8. I get good rates thru my Credit Union.

I have one debit card and one credit card. I never carry over a balance to the next month.
This is all I need, even though I get come-ons several times a week from BAC, Chase, et al.

[Liberal_in_LA]

9. I got rid of all of them. Only use the debit card now

[XanaDUer]

10. Be careful

doing so can have a negative effect on one's credit rating. Which I discovered the hard way.

[Mnemosyne]

21. I did too. Had credit score of 723 when I made the mistake of paying things off. Now credit score is

Zero. They punish you, used to be it made your credit good.

[pecwae]

27. You have to be careful having too many as well.

I just canceled 6 that were older, never used. I was worried about fraud which had just occurred on a debit card. I was told that having too many with high limits made you a credit risk; the high limits, even though not used, was counted as a potential debt. Finding out the happy medium would be great if someone in the know would let it slip. I kept 3 open, use one pretty exclusively and pay it off each month.

[XanaDUer]

60. They don't want anyone of us plebs to know

I am always concerned about FICO score b/c they now check that for JOB hiring, even if you're not handling money.

I like to move around about 3-4 years, so I need to keep mine at a good level.

[pipi_k]

12. Not likely...

It took me too long to get good credit and have a credit card.


and this whole "If I can't afford it I don't buy it" stuff sounds good on its face, but it really sucks if the water heater blows or the refrigerator craps out or one of the vehicles needs expensive repairs. Those aren't exactly luxuries.


I have three cards. One of them is through Chase bank and I haven't used it since last year. I only plan on using it once or twice a year in order to keep my available credit high.

The other two, I keep low enough to pay them off each month...except for Christmas. Then I pay them off over the course of a few months, not charging anything more until their balances are zero.

[Warpy]

13. I use an ATM card on a junk account

whose balance I keep fairly low. Then there's nothing to pay off at the end of the month.

If I can't afford something, I don't get it, either.

[TBF]

14. Great article

We "borrowed" on credit cards in graduate school and have lived to regret it for many years. Now after closing accounts and years of paying off interest, we are down to a couple of secured cards that we carry a couple of dollars on to make sure the credit cards report the good use (trying to raise the credit score so we can bring down our car insurance rates etc ...). It took us YEARS to pay off the others and is probably one of the most predatory areas of capitalism (well, it's all predatory, but this is one of the most visible areas). My advice to young folks coming out of high school/college would be to have one card for car/hotels/airlines, and use it occasionally to buy gas or coffee (paying most of it off every month, leaving maybe 5% so they report it on your credit and keep your credit score high). Other than that use cash (or debit card) and don't buy things you can't afford. You'll pay your student loans off much faster, and everything else will follow.

[handmade34]

16. that is one difference

between you (me) and the wealthy... they use credit to make money... we don't have the means to do that in any meaningful way

[hunter]

18. My credit card is useless but for two things...

... renting cars and reserving motel rooms.

When I return the rental car or check out of the motel room I pay the bill with cash or a debit card.

My credit rating was destroyed by medical bills so the only credit card I have has incredibly usurious rates.

[qb]

20. I have one debit card & pay cash whenever I can. The banks are screwing everyone with their fees,

[JoePhilly]

22. One debit card that I use often, and one credit card for emergencies.

And currently a zero balance on that card.

We cut up all the cards about 10 years ago.

[Shagbark Hickory]

23. Good idea Brett Arends. Let the whole world know you're walking around with a wad of cash because

you don't have the discipline to use a credit card.
I'm sure the pickpocketers are lined up outside your door.

[customerserviceguy]

47. You make a great point

If swipe fees get capped too low, and banks stop offering the cards, many people will have to go back to cash, and that will make us all more vulnerable.

[Shagbark Hickory]

54. Oh then watch the banks stick it to us on ATM fees and checking-related fees.

I'm hoping the Bit Points concept will take off.

[customerserviceguy]

56. Oh, they will

with the checking-related fees. Free checking is a bit of an anomaly, anyway, before the high interest rates of the very late Seventies, all checking accounts charged monthly fees. Once banks could make a lot of money with peoples' deposits, the race was on to see who could amass the most new customers. When interest rates dropped back down again, banks made up for the loss by the use of technology.

It costs them way less to process a transaction through their own ATM than with a human teller, that's why they'll never hike fees for use of their own ATM's. I do expect them to charge us fees for debit card use at point-of-purchase machines. I'm not familiar with the Bit Points concept, and a web search doesn't bring up anything related to banking, perhaps you could enlighten me.

I do expect to see some creative ideas for banks to give free checking, as I recall, in the 1970's, a bank called Seattle Trust would give you a free checking account as long as you always kept $500 in savings. Being as that was about a month's wages for me, it was difficult, but I managed to do it. I can see situations where banks (and credit unions) will keep free checking for people who have their credit cards, IRA's, savings, etc., and will use the cheap processing ways of direct debit, bank's own ATMs, and electronic banking.

[Shagbark Hickory]

59. bitcoins. Sorry, it's bitcoins, not bitpoints.

Helps if you can remember the correct name.

http://en.wikipedia.org/wiki/Bitcoin

To summarize it in one sentence, it's a global peer-to-peer digital currency you can use to pay for things.

[customerserviceguy]

64. Interesting system there

I would imagine that if banks start charging for checking accounts (given the rate of inflation since they last routinely charged for them, I'd expect a minimum of ten bucks a month) that online alternatives that don't have to spend money to maintain sizable edifices in every town might indeed seize the opportunity.

[unblock]

24. fairly stupid to outright cancel them. just don't use them.

well, there are a few reasons you might want to cancel them outright:
- to avoid an annual fee
- to protect yourself from your own irresponsibility (if you're the kind of person who can't help but use them if you've got them even when you can't afford it)
- to protect yourself from unauthorized use (e.g., if you can't trust your credit with someone you're living with or were recently living with)


but by and large, it's far better to simply stop charging them up and leave them open. this will preserve your credit score and leave the credit line open just in case you need it and the situation is such that it is actually wise and responsible to use it.

[pipi_k]

32. Although you have to make sure...

the company doesn't cancel it for non-use.

Mr Pip had the same Chase card I have. He didn't use it for the longest time, and they ended up cancelling it on him.

That's why I use mine every so often for something really small even though I would rather not use it at all. Don't want them to cancel it on me for non-use...

[unblock]

36. true that. i use otherwise non-used cards once every 3 months

just in case.

[Coyote_Bandit]

25. Three Cards

One with a 25 year history. The other two with over a decade of history - one through a large multi-national and the other through my own bank. Got rid of the AmEx about a decade ago. I have found the multi-national to be far more proactive in identifying and taking steps to prevent fraud.

I use them all. One carries no balance. The other two carry small balances. I pay off new charges monthly and those balances do not increase. I could pay the balances in full. My interest rates are favorable - both less than 10% and one less than 5%. I have carried those balances for nearly a decade.

I charge almost everything I buy to a credit card and use it to monitor expenditures. I have found that I actually spend less when using a credit card than when using cash. I do not have a debit card - and don't want one.

My small old home and nearly 8 year old car are paid for. I use credit cards so that I have a credit history. Without that I'll never find another job.

[shanti]

26. i did that 4 years ago

when the warning cry went out then. good thing too.

[Dappleganger]

28. One card, which we paid off last week.

It didn't have too high of a balance compared to many folks, but it was looming over us for a long time and we were so relieved to be able to pay it off. Up until dh lost his job a few years ago we'd always paid them in full each month, but since then we have really struggled (and run through all of our savings). We are slowly building back up but it was too slow, so I sold my motorcycle (can't ride it anyway due to my back) and paid off the card and have enough $$ leftover for ds' tuition in September.

Credit cards are the devil.

[Curmudgeoness]

30. Do not cancel your credit cards.

Cancelling any credit card will hit you in your credit scores, and since these are used for everything from buying a home or car to how much you pay for insurance or whether or not you get some jobs, this score is important.

There is a lot of good advice in this article, but cancelling your cards is not one of them. Use cash. Yes, that is great advice. Personally, I use credit cards to buy gasoline. I have to spend that money anyways, and it keeps the cards active. Pay the balance off every month and you do not get caught up in the usury they call interest. And you will still have that card in case of an emergency or purchase that cannot be done with cash.

[pipi_k]

34. Yep, had forgotten to mention

that when I pay the entire balance each month I avoid interest.

And one of my cards (through Pen Fed) actually gives me money off each month. It's not huge, but over the course of a year it could really add up depending on what and where I buy.

I write down what I charge for each card, and I keep in mind when each closing date is, when the bill will come, and when it's due. Sometimes I wait until the day after the closing date on a card to charge something if it's something I only want but not really NEED. That way it won't show up (and need to be paid) until the following month.

Keeping a record of spending, though...I think that's one of the most important things.

[roamer65]

37. Do not cancel all of them...I agree.

It will whack your credit score big time as will paying them all off.

If you are interested in buying something where a good credit score is essential (i.e. house)...the sweet spot is to run a revolving balance around 10-20% of your total allowed credit. This is also the fastest route to repairing damaged credit scores.

Keep enough liquidity on hand to pay it off in a financial emergency.

Sadly this is the game now being played.

[Curmudgeoness]

39. Not true that paying them all off will hit your credit score.

I have never carried a balance from one month to the next (therefore, never paid interest). And my credit score is excellent.

Actually, there may always be a little balance since I have to fill the car up every week. But I have rarely had even close to 10% balance and no revolving balances. I keep waiting for the rules to change on this and the credit card companies to show their anger at me, but so far, that has not happened.

And you are right, this is a game (the game of life???) that we all have to learn the rules to, and in midstream, they always add a new rule. Bastards.

[roamer65]

46. I will affect it when it comes to loan or mortgage time.

They pull credit reports and look for sizeable ONTIME monthly payments with duration when you apply. No ontime monthly payments equals a worse or unknown credit history...a big dent. I was told this by a banker.
People who use charge cards and make their payments ONTIME are much better off credit score wise than people who cancel them all and try to live off cash.
What you are doing is far better than cancelling all of your cards. These people who cancel all of their cards are comitting credit suicide.

[bluesbassman]

50. This is extremely important if you intend on refinancing or buying a home.

Depending on the type of mortgage you apply for, you may need to show THREE "active" trade lines. A car, student loan or other installment loan will count, but if you don't have any of those you'll need revolving (credit card) history of at least 12 to 24 months.

To be clear, an "active" trade line is one that has recent payment history. A card that is an open account, but has not been used in over 12 months is actually a manual downgrade for underwriting guidelines and can cause an otherwise high score to be lowered resulting in up to .5% higher interest rates, or in the case of high balance loans an outright denial. Just buy a tank of gas or groceries on your cards every 3 months and then pay off. Shows up as recent history then.

One more thing, don't be tempted to put all of your balances on one card to get a lower interest rate. If you max the card (balance to limit ratio) it can drop your score 30 to 100 points. Alway keep your credit card ratios at no more than 30% of limit. Where this really hurts are small limit cards (usually store or specialty card) that have only a few hundred dollar limit. You think you have a small balance, but in reality you have a maxed out card.

[Edweird]

31. Way ahead of the game. My credit cards cancelled me a while back.

[Zorra]

33. I have always paid cash, and never use credit for anything.

I have no debt, and could care less about credit scores.

Banks, credit, and credit cards enslave the the majority of Americans, IMO.

[A-Schwarzenegger]

35. I barter everything.

If I can't barter it, I don't get it.
Been doing it since ought-one. Cuts
down on nonsense.

[Odin2005]

38. I will never have a credit card, EVER. They are evil.

[Curmudgeoness]

40. Not evil. You just have to know how to use them.

The problems arise when people do not know how to stop using them.

[Odin2005]

41. Don't have one and you won't be tempted to use it.

The best way to resist using something impulsively is to not have it.

[Curmudgeoness]

43. True. Self-restraint works too. In this day and age,

I think it is difficult to go without at least one credit card. Hell, I have to have a credit card just to cash a check as a form of ID. Car rental is not possible without one. And having a credit score is almost a necessity if you ever want to buy a house or car.

I use cards very minimally, but would not be without at least one.

[tritsofme]

42. Extremely poor advice for anyone looking to build credit.

A huge portion of your credit score is based on the age of your accounts, and your credit utilization ratio.

If you start closing old accounts, your credit score will take a dive, and as you close these accounts your available credit will go down and your score will drop even more.


If you don't want to use credit cards as some sort of budgeting strategy that is fine, but to cancel them would be extremely stupid. Why not just put them in your desk drawer?

[customerserviceguy]

48. Agreed

If a credit score were not tied to getting a job or auto insurance, this advice might not be as harmful as it is.

The only way out of the problems of credit cards is to develop some personal discipline, the ability to say no to impulse purchasing.

[Maru Kitteh]

44. No.

[RebelOne]

49. Don't have any. I declared a Chapter 13 bankruptcy

several years ago because credit cards were the reason I got into trouble. So now I have vowed to never again have a credit card. If I cannot afford to buy something for cash, I just will not buy it. I need a newer car and I have enough cash in the bank to buy one, but I will just drive my present car until it totally falls apart.

[felix_numinous]

53. A major step toward getting 'off the (corporate bankster) grid'

is refusing to play their ripoff game. Congratulations.

[robcon]

57. The 'points system' is a great bonus for credit cards.

I use them whenever I can.

[sarge43]

58. I've kept one and I pay off the balance the very few times I use it. n/t

[pstokely]

61. A lot of places don't even take cash

nt

[LynneSin]

62. Cancel all but one that has the best deal for you.

Thing is this, you never know when a fricking emergency happens. Perhaps you're traveling and need to get home right away, perhaps there is a hole in your roof - a million emergencies could happen.

Credit Cards, while easy to abuse, can also be very useful in times of emergency. Review all your cards and find one that has the best terms for you and then just leave it untouched. I have a card like that with a $6500 credit limit - I have yet to phone it in and activate it. But if I needed it, it's there.

A 2nd card that is always useful to keep around even if you never use it is a Sears Card. It was the first credit card I ever had and will never get rid of it. BTW a few years back sears automatically upgraded me to a Sears Mastercard. I called them and told them to get rid of MC and just give me a plain Sears Card. The reason to have one - most Sears have a reliable automotive department. Back when I had very little money and crappy credit - I closed every card but Sears figuring at least if I needed major car repair I could use that to get it done. I think the most I've ever used it with Autorepair was a set of tires.

[ChoppinBroccoli]

63. Credit Cards Got Me Into Trouble About 10 Years Ago And I Haven't Had Them Since

I can honestly say that I don't even miss them. Especially now that you can use an ATM card as a "credit card." It means you don't have to carry cash around, can make online purchases, AND you don't get overextended. My problem was that it was just way too easy to think of credit cards as "invisible money." It changes the way you consider your purchases when the bill doesn't come until later, because a lot of times I found myself thinking, "Well, I can't afford this NOW, but by the end of the month, I'll be fine." Having only a limited supply of money and knowing how much was there and that that was all there was helped me regain that discipline. The only way I'd even consider having a credit card now would be just to have in case of emergencies.

[scarletwoman]

66. You don't need a credit card for emergencies if you keep a savings account.

I've never had a credit card. I just make sure I have a financial cushion put by. So far, I've never had an emergency I couldn't pay for in cash.