Closing Credit Cards

[maddog21]

I have a few Credit Cards that I no longer want but I am worried that closing them will impact my credit score. I have a Platinum AMEX card which costs me $475 a year and a Citi Premier card which costs me $50 a year. I really have no use for these cards anymore and I want to get rid of them. Will this hurt my credit?

[jpg7n16]

Are you applying for a home loan sometime soon? Or do you have a big need for credit in the near future?

I honestly don't care about my credit score. I'll do what's best for me, and let it be whatever it is.

Now why in the world would you pay $525 to keep open a card you don't even want/need/use?? That's pointless. Pay them off, close the cards and save the money.

[minnie1928]

I too would close them unless you have major loan in your foreseeable future. Another idea would be to call them to see if they have a card that does not have an annual fee, maybe they could convert your account to a different program. I know Citi has a different card for every imaginable reason, many without annual fees. Amex might be a different story however.

[maddog21]

The only reason I have the Platinum Amex is because of travel and I do travel quite a bit for work. I just can't understand why closing a card could hurt my credit especially if the card has an annual fee. That seems like BS to me.

I am thinking about securing a loan for some investment properties so I do care about my credit score.

[jpg7n16]

It's because (in the words of Dave Ramsey) "the FICO score is an 'I love debt' score"

If you're closing cards, that means you don't have as much credit available to you - which the score assumes you don't deserve that credit anymore, so you must be a higher risk. It doesn't care about fees, interest rate, what's good for your personal net worth. It only cares about how much credit companies are willing to lend you, and how good you are at paying them back on time.

What's funny is that closing a card can hurt - and so can applying for a new card. Because if you're seeking the credit, obviously you need credit right? So then you are a higher risk.

Dumb? Yes.

[maddog21]

That's really unbelievable!! So, essentially they get you on the way in and on the way out.

[jpg7n16]

Debt is like that. There's a Mark Twain quote that runs across the top of this site that says:

"A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain."

And I remember working at a bank. And when people applied for a loan, in order to get a loan - you pretty much had to prove that you didn't need it!


But the reasons I gave above are why I don't worry about my credit score. If I don't need a Credit Card, why should I apply for one? "it will raise your score over time" so what??

That's like saying, "You should buy this hat." - but I don't like it, it's ugly and I won't wear it - "but it'll increase your wardrobe score" - so what?? I won't use it - "well what if you need to wear a hat one day?" - then I'll worry about that when the time comes

That's how I feel about debt/credit cards. I don't like it, it's ugly and I won't use it.

[maddog21]

That is such a funny quote and so true. I really appreciate the advice.

Thanks

[JoshuaHeckathorn]

Managing credit scores is a juggling act. If closing the cards will drop your scores enough to cost you the best terms on this investment loan, then it might be worth it to pay the $525 and save thousands more over the life of your loan. The big question is how much will your credit score suffer if you close the cards? There are so many variables involved, it's just too difficult to make an educated guess.

As others have mentioned, your credit utilization ratio might take a hit, and your credit history could also be affected. Your credit utilization is what I would worry about most, since it accounts for a large chunk of your FICO score. But if these cards aren't your oldest and you have the time to replace them with a no annual fee card that provides a similar credit limit, that might be a good option to consider.

For me, using credit cards is all about convenience, purchase protection, managing cash flow, and getting rewarded for the money I do spend. I just got a $200 check from Costco for using my Amex True Earnings card over the past year. You can't get that by living a cash-only life. But like most financial products, credit cards can either be used to our advantage or disadvantage depending upon the decisions we make.

[littleroc02us]

I would close them. I closed mine and for a little while it affected my score, but it is back to normal after a few months while paying my mortgage on time.