| Should I cancel my credit card? |
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| Which should I cancel? |
| Discover |
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33% |
[ 2 ] |
| US Bank Visa |
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16% |
[ 1 ] |
| Neither |
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50% |
[ 3 ] |
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| Total Votes : 6 |
chuck1
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Location: Portland, OR
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| Should I cancel my credit card? |
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I have 3 credit cards. A Visa with my credit union ($1000 limit, 12.99% APR) that I started in July 2010, a Discover card ($1500 limit, 18.99 APR) that I started in December 2010, and a Visa with US Bank ($1400 limit, 15.24% APR) that I started in 2007. All cards have a zero balance. I recently closed my checking and savings accounts with US Bank because they started charging me monthly fees, but I kept the Visa with them just in case. Lately, however, I've been considering cancelling that Visa or possibly the Discover I just signed up for to simplify my finances and not have to worry about making a yearly purchase to avoid the annual fee, reducing the possibility of identity theft, as well as simplifying my financial situation. I've heard that cancelling a line of credit can negatively affect my credit score. Right now my credit score is good, and I don't plan on applying for any home/auto loans anytime soon, so I'm wondering if I do, how soon will my score recover? I'm leaning toward cancelling the Discover card. Do you think this is a good idea or a bad idea?
Thanks!
- Chuck Carroll
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Thu Jul 07, 2011 10:30 pm |
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eastmn
Senior Member
Cash: $ 81.20
Posts: 393
Joined: 04 Apr 2010
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The age of your accounts and credit lines weigh on credit score. I'd hold on to them and use them periodically. You might also use the better accounts to bargain with the bad, to try and reduce rates and increase credit lines. Of coarse, you should always pay the balances, in full, monthly. Otherwise is asking for trouble (a sitting duck).
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Fri Jul 08, 2011 11:23 am |
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soybean
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Location: Ohio
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I agree with eastmn. But, IF you were to cancel one, the Discover Card should be the one because of its higher interest rate. However, like eastmn, I'd keep them and use them periodically. Using them as little as twice or even once during a year may be sufficient activity to prevent closure by the company. Making a phone call to each card to inquire about their policy regarding this issue could eliminate any guessing about their policy; you might also read the fine print in the Terms of Conditions for the account to see if it addresses this issue. If you know that once a year is often enough, that should be easy to maintain. Just make small purchase for something you'd be buying anyway such as food or gasoline and then pay it off before any interest is applied.
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Sat Jul 09, 2011 11:38 am |
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RonBrun
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I voted to cancel neither card. The best way to use credit is for you to leverage it, instead of it leveraging you.
You are doing well to maintain zero balances. The overall combined credit limit is not terribly high with the three cards. You can maintain and/or increase your credit score by using each periodically, and paying them off before they incur interest. You may also receive rewards or points for using them, although the primary goal should be the increased credit score.
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Fri Jul 15, 2011 2:33 am |
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coaster
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Location: Wisconsin
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The ratio of used credit to available credit makes up 1/3 of a FICO credit score.
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Fri Jul 15, 2011 3:54 am |
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eastmn
Senior Member
Cash: $ 81.20
Posts: 393
Joined: 04 Apr 2010
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EDIT:
My Credit Union uses a formula, a percentage of my income/expenses to come up with that number (available credit). I did some googling; and it looks like available credit card balances is separate, (weighs fairly lightly into your score, around 7%).
Last edited by eastmn on Fri Jul 15, 2011 1:32 pm; edited 1 time in total |
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Fri Jul 15, 2011 11:32 am |
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littleroc02us
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What do you mean by "just in case?" Do you keep a credit card around for emergencies or something? Bad idea if you do. You should have an emergency fund that is in liquid form.
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Fri Jul 15, 2011 1:21 pm |
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coaster
Senior Advisor
Cash: $ 1357.80
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Location: Wisconsin
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quote:
Originally posted by eastmn
I did some googling;
You don't need to google. 95% of what you find by googling is horse manure. Why not go right to the source: the Fair Isaac Company, who developed and license the FICO scoring model, makes no secret of what makes up a credit score:
www.myfico.com
Be aware that the credit reporting agencies are pushing their own scoring model called a "Vantage Score" which is different from the FICO score. It's the FICO score that's used by lenders.
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Fri Jul 15, 2011 4:50 pm |
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eastmn
Senior Member
Cash: $ 81.20
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Joined: 04 Apr 2010
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> http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx
Thanks Dr. Coaster 
Their forum has a relative thread saying that it's good to keep 2 to 4 credit cards with no more that 10% available credit being used.
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Fri Jul 15, 2011 8:00 pm |
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scot184
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Location: Los Angeles, CA
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I'd recommend that you keep the US Bank credit card open, as it's the oldest credit card in your credit history, and thus weighted the heaviest.
Closing the Discover card is fine - I think people worry too much about closing a credit card account, and this is kinda backed by the credit industry because they don't want to lose your business.
If anything, you may see a minor ding to your credit, but your credit score will be just fine long-term if you practice healthy credit habits such as paying on time, keeping balances low, and applying for credit sparingly.
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Fri Jul 15, 2011 11:26 pm |
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coaster
Senior Advisor
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quote:
Originally posted by eastmn
it's good to keep 2 to 4 credit cards with no more that 10% available credit being used.
I agree with that. I see no sense in closing any revolving credit account so long as you have the will and discipline to put the card away somewhere and not be tempted into using it. I suppose if you can't trust yourself to not use the card and/or keep your credit usage below that 10% ratio, then the second-best advice is to go ahead and close the account. Because being debt-free is more prudent from a personal finance point of view than is having a high credit score.
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Sat Jul 16, 2011 5:40 pm |
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PFFT
New Member
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Joined: 15 May 2011
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Although it is not a popular option, I would close all of the cards except the one from US Bank. It is the oldest and that is good for your credit score.
You said that you were not going to apply for any other credit in the near future so why put so much interest in your score in the short term? You are much more than your credit score. It will stabilize over time after closing the cards. Having one credit card is the way to go in my opinion.
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Sun Jul 17, 2011 3:52 pm |
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eastmn
Senior Member
Cash: $ 81.20
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Joined: 04 Apr 2010
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I'm no fan of the Discover Card (AKA Sears, KMart). Same class as Burger King. Checkout your local CREDIT UNION's low rate cards.
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Tue Jul 19, 2011 2:01 pm |
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