Closing Credit Card accounts

[postit1979]

I have 2 credit cards that I am trying to get paid off. These both have
annual fees that are billed monthly even if I do not use the cards.

I have read that it lowers your credit score if you close the accounts, but I don't want to have to pay a few dollars a month on cards that I don't ever plan on using again.

Should I go ahead and close the accounts anyway???

[Seeker]

Originally Posted by postit1979

I have 2 credit cards that I am trying to get paid off. These both have
annual fees that are billed monthly even if I do not use the cards.

I have read that it lowers your credit score if you close the accounts, but I don't want to have to pay a few dollars a month on cards that I don't ever plan on using again.

Should I go ahead and close the accounts anyway???

Yes, you should close any accounts that you have to pay an annual fee on.

[fruitbowlk]

Credit Cards > Stories > Credit card tips: Do's and don'ts when closing accounts


Email Do's and don'ts when closing old credit card accounts
By Ben Woolsey

It is always important to not have more credit card accounts than you can handle. When you do open a new account because of a better interest rate, a promotional offer or for whatever reason, you should always close any current credit card accounts you no longer plan on using. There are many reasons why you should do this:

Helps you keep track of your credit cards
Keeps your credit report cleaner
Qualifies you for loans by lowering the amount of revolving debt
Helps you avoid unnecessary fees
Prevents you from being a victim of identity theft
To help you understand what you should and should not do when closing old credit card accounts, here are a few tips to keep in mind.


What you should DO when closing credit card accounts…

Close unused and idle credit card accounts. – Doing so prevents your from being a victim of identity theft and from being charged annual fees for unused cards.
Cancel credit card accounts with current balances that you want to pay off and no longer use. – If don’t want to use a credit card anymore, you can close the account and then concentrate on paying off the balance. This strategy keeps you from spending more on that account and lowers your amount of available debt when applying for a loan.
Ensure you still have several credit card accounts open. – Keeping several credit card accounts open will keep your credit score and debt balances healthy. Creditors view signs of activity and responsible credit use positively. However, you must use these credit card accounts responsibly or you could find yourself suffering from a poor credit rating.
Have one card designated for regular use and pay it off each month. – This one card can be reserved for everyday spending while your other credit cards can be used for emergency or specific purposes, such as vacations, business trips, etc. By paying off this one card each month, you won’t need to worry about carrying a balance when using the other cards for higher priced items.
Check your credit report. – After closing an account, check your credit report to ensure that the accounts have been marked as closed and to determine whether there are any errors. Look for late payments, high balances and signs of identity theft.
Destroy canceled credit cards. – It is important to cut up closed credit card accounts by cutting through the account number. This prevents someone else from stealing your credit card and reopening the account.
What you should NOT DO when closing credit card accounts…

Don’t close your oldest credit card account. - This could cause your credit history to appear shorter and could harm your credit score. Better to keep the account open and not use it or just use it infrequently. If you want to close it because of a higher interest rate, contact the credit card company to see about lowering the APR.
Don’t expect credit card accounts to close automatically. – The only way an account is closed is if you contact the credit card company in writing asking to close the account. Contact their customer service department if you need their mailing address. Typically, they will confirm that the account is closed within 10-15 days.
Don’t be pressured into canceling several accounts at once. – It is better to gradually pay down and then close the accounts if you are unsure about the impact doing so will have on your credit score or you are uncertain as to the amount of debt you need to carry. You may need those credit cards again in the future.
Avoid over-consolidating balances onto one card. - If your credit balances rise to above 50% of your available limits, you may see a drop in your credit score.
Having a credit card is a privilege and a benefit that many people enjoy. Be smart when closing old accounts to ensure you get the best possible APRs and benefits from your credit cards

[nextel500]

Originally Posted by postit1979

I have 2 credit cards that I am trying to get paid off. These both have
annual fees that are billed monthly even if I do not use the cards.

I have read that it lowers your credit score if you close the accounts, but I don't want to have to pay a few dollars a month on cards that I don't ever plan on using again.

Should I go ahead and close the accounts anyway???

I wouldn’t.

[disneysteve]

Originally Posted by postit1979

I have 2 credit cards that I am trying to get paid off. These both have
annual fees that are billed monthly even if I do not use the cards.

I have read that it lowers your credit score if you close the accounts, but I don't want to have to pay a few dollars a month on cards that I don't ever plan on using again.

Should I go ahead and close the accounts anyway???

Do you anticipate applying for any loans in the near future (new car, mortgage, HELOC, etc.)? If the answer is no, go ahead and close the cards once you pay them off. It makes no sense to keep paying for cards that you aren't using. In most cases, though not all, it makes no sense to pay an annual fee at all.

Yes, your FICO score will drop some when you close the cards, but that is temporary. It will gradually drift back up. As long as you aren't doing anything soon that will depend on your score, don't worry about it.

[maat55]

I would ask them to drop the fees. If they don't, I would close them. I'm against buying a credit score, paying fees is not worth it. I also do not carry a balance, you should only buy on CC's what you can PIF at the end of the month.

[nextel500]

Originally Posted by disneysteve

Do you anticipate applying for any loans in the near future (new car, mortgage, HELOC, etc.)? If the answer is no, go ahead and close the cards once you pay them off. It makes no sense to keep paying for cards that you aren't using. In most cases, though not all, it makes no sense to pay an annual fee at all.

Yes, your FICO score will drop some when you close the cards, but that is temporary. It will gradually drift back up. As long as you aren't doing anything soon that will depend on your score, don't worry about it.

Perhaps he can do a balance transfer and come up with a new card or cards to help him get rid of his balance. Problem is, his FICO will also go down because his balance to available credit would go up which will hurt it. Technically charge cards, if that is what he is talking about, do not have limits so his FICO should not be affected, however paying them increase your score. True no?

[disneysteve]

Originally Posted by nextel500

Perhaps he can do a balance transfer and come up with a new card or cards to help him get rid of his balance. Problem is, his FICO will also go down because his balance to available credit would go up which will hurt it. Technically charge cards, if that is what he is talking about, do not have limits so his FICO should not be affected, however paying them increase your score. True no?

If he can get a 0% card and transfer the balances, that would be a good way to go (unless the balances are pretty small and will be paid off shortly).

What matters to FICO is your utilization ratio, your outstanding balance relative to your credit limit. Ideally, it should be no more than 30%.

I'm not sure what you mean about credit cards having no limits. Mine certainly do.

[nextel500]

Originally Posted by disneysteve

If he can get a 0% card and transfer the balances, that would be a good way to go (unless the balances are pretty small and will be paid off shortly).

What matters to FICO is your utilization ratio, your outstanding balance relative to your credit limit. Ideally, it should be no more than 30%.

I'm not sure what you mean about credit cards having no limits. Mine certainly do.

Yea he has to watch out on the 3% and higher on those balance transfers though. I know some companies like to charge in excess of $100; American Express has a cap of $100 if I remember correctly.
I meant charge cards ideally have no limits so I thought when he mentioned he pays an annual fee he was talking about charge cards. I have a few charge cards myself. It would be great if he would tell us more information, we would be able to help him.

[disneysteve]

Originally Posted by nextel500

I meant charge cards ideally have no limits so I thought when he mentioned he pays an annual fee he was talking about charge cards.

What is the difference between an charge card and a credit card?

A lot of credit cards, particularly reward cards, have annual fees. Most of the time they aren't worth paying, but sometimes they are because of the benefits you get in return.

[Jazzmint98]

I think a charge card (like American Express) must be PIF each month, whereas you can carry a balance on a credit card. That's how I understand it.

[nextel500]

Originally Posted by disneysteve

What is the difference between an charge card and a credit card?

A lot of credit cards, particularly reward cards, have annual fees. Most of the time they aren't worth paying, but sometimes they are because of the benefits you get in return.

Charge card is a card that you have to pay the amount of money that you charged every month or you can have some sort of payment plan but at a very high interest rate. Technically there is no limit so you are approved based on a number of factors.
Credit card has APRs; you can pay per month in full or over time. You have a set limit.
Those are the main differences. Other differences could include certain concierge and programs. Annual fees also vary.

[nextel500]

Originally Posted by huffydeb2003

I think a charge card (like American Express) must be PIF each month, whereas you can carry a balance on a credit card. That's how I understand it.

Not exactly on the American Express part. You can opt to have what is called “Flexible Payment Services”, whereby you can extend payments but at a very high APR. You can choose what you want to pay now and what to pay later.

[Jazzmint98]

Originally Posted by nextel500

Not exactly on the American Express part. You can opt to have what is called “Flexible Payment Services”, whereby you can extend payments but at a very high APR. You can choose what you want to pay now and what to pay later.

Oh, ok I didn't realize that you could do it that way.

[nextel500]

Originally Posted by huffydeb2003

Oh, ok I didn't realize that you could do it that way.

No problem. I have American Express so I would know a lot of information about this matter.

[disneysteve]

Originally Posted by nextel500

Charge card is a card that you have to pay the amount of money that you charged every month... Technically there is no limit

What advantages does this offer over a credit card? My CC has a limit, though realistically it doesn't because it is so high we would never possibly charge that much (over $30,000). Do the charge cards offer better rewards programs or provide other benefits?

[nextel500]

Originally Posted by disneysteve

What advantages does this offer over a credit card? My CC has a limit, though realistically it doesn't because it is so high we would never possibly charge that much (over $30,000). Do the charge cards offer better rewards programs or provide other benefits?

When you charge $100, you need to pay that right back within a 30-day grace period especially if you do not qualify for those extended payment plans at a very high interest. If you are late your credit gets hurt a lot but if you pay on time your credit rating increases quickly. They also trust you more increasing that “no limit” to a higher “no limit”. Your CC also has a limit, which means the more your balance goes closer to your available limit that means your FICO score will go down. Not true with Charge Cards as there is no limit. Well, $30k limit these days are not that much but you still have a limit.

Usually, higher the annual fee you pay the more services/programs/rewards you get. I am not an expert on this but from experience, the answer is yes given the nature of what the cards I had both charge and credit cards. perhaps someone who has more knowledge on this should elaborate further, but I am just speaking from experience. Chances are the Charge Card’s customer service will help you more than the credit cards because you pay more on the charge cards than the credit cards.