Seriously, why keep credit cards open

[Thriftina]

when you pay them off and when you already have big ticket items that depend heavily on credit scores, ie, homes, cars.

When I mention paying off my cards AND closing them, it's like the world's coming to an end to some people. They alarm me to not close out the accounts because it will damage my score. I really don't care anymore since I have a car and am a home owner. Why have credit out there floating around for thieves when you have a 0 balance? Keeping the cards will only tempt you to charge when you don't have cash.

[buildmybudget]

You're absolutely right, but if you know that you have a good hold on your credit cards, why not leave them opes so that:
1) your credit isn't affected(and only improves if you continue to use your card wisely)
2) in case you're ever in a tough spot you can actually use a card if you absolutely have to

If you have several cards, I agree with closing some, but otherwise build a budget that you can stick to and use your credit card as a supplement to your emergency fund.

[swanson719]

Aside from a FICO score, there is absolutely no reason to keep open credit cards. They might be nice when you absolutely need something and you're out of your EF, but if you use them then, you won't be paying them off each month either. We don't carry one, I've never had one. We have 2 paid off cars and a new house w/ a 5% interest rate, and my FICO is in the 670's, largely because my only open account is my mortgage.

[jim82000]

My insurance company told me that people with better credit tend to file less claims. They periodically run credit checks on their customers, and if you have a good credit score, you will have lower insurance payments.

A few more:

If you ever want/need to refi, a good credit score is important.
If you buy a new car, and finance it, once again it's important.
If you were to get hit unexpectedly with a huge medical bill, that extra credit is great to have
Credit card companies aren't being near as generous these days with credit, and they're taking some back from people who don't use it. I say keep what you have, lock the cards up in a safe if you're worried about the risk of someone getting a hold of them.

[happygirl]

If you already own your home and don't plan on moving and taking out another mortgage ever, you buy your cars with cash and you don't anticipate having to borrow money to put your kids through college, I don't think you need credit cards. I think Dave Ramsey recommends you have a debit card for tickets, rentals etc. Not sure what other finance/budget gurus suggest.

[am_vanquish]

Originally Posted by jim82000

My insurance company told me that people with better credit tend to file less claims. They periodically run credit checks on their customers, and if you have a good credit score, you will have lower insurance payments.
A few more:

If you ever want/need to refi, a good credit score is important.
If you buy a new car, and finance it, once again it's important.
If you were to get hit unexpectedly with a huge medical bill, that extra credit is great to have
Credit card companies aren't being near as generous these days with credit, and they're taking some back from people who don't use it. I say keep what you have, lock the cards up in a safe if you're worried about the risk of someone getting a hold of them.

Utility companies do the same thing. When we moved into our new apartment, the gas & electric companies checked our credit scores. If you're under some threshold, they make you put down a deposit before opening your account. I believe some cell phone companies do the same.

Also, the rewards programs of some credit cards (when used responsibly) can be a very large advantage of having an open credit card, using it often, and paying it in full every month. I have never paid a dime to my credit cards, but I've raked in hundreds of dollars in cash-back rewards, which we apply to house downpayment fund.

[Radiance]

I have 4 credit cards, two are paid off. I just put them on the drawer. It doens't bother me that they are there. They have no annual fees. [Last time I checked at least, hmmm, I might want to confirm that]
I think I can use them when there is an emergency that surpases my emergency fund (which is $50 right now... so pretty much any emergency for now)
I can also use them when there is a good offer (if you pay with your master card, take 10% off)
I plan to always keep at least one. I like my visa, they didn't lower my limit.

[LivingAlmostLarge]

I have open cards from the past that aren't used. It's not a huge deal.

[boosami]

Sure you have a home and a car, but what if you want to refinance at some point? Or take out a HELOC and renovate? Or buy a second home? Just because you own a home and a car doesn't mean you'll never need credit again.

People ALWAYS bring up identity theft. I do not shred my documents, am not super discrete about my personal information, have 25+ open unmonitored credit accounts, and have NEVER had any fraud or theft happen to me in over a decade. Does identity theft happen? Sure. Does having a few credit card accounts open make it more likely to happen to you? Probably not. Plus you're not liable for any of the charges.

Closing a credit card account from a FICO standpoint (from another post of mine):

In almost all situations, closing a credit card account can either reflect either neutrally or negatively on your credit score. Because there's typically no positive effect, many people prefer to leave accounts open and let them go inactive instead of closing them. Here are some of the effects of closing a credit card account...

A big factor in your credit score is your utilization ratio. That's how much debt you have compared to how much available credit you have. When you close an account, you lose whatever available credit you had there. This can cause your utilization ratio to go up, and lower your credit score. However, if the utilization doesn't change much (less than 10 percentage points), your score will not be significantly impacted. Typically this happens when you carry zero or small balances, have several cards with comparable or higher limits than the card you are closing, or the limit of the account to close is very low.

Your payment history is another big factor in your credit score. When you close an account, the good credit history from it stays on your report for 10 years from the date you close it (most negative remarks fall off 7 years after they were reported). So, you will not lose any good credit history until a decade after you close an account. In most cases, this will not harm your score because in 10 years you will have other accounts with good history and losing one account will not affect it significantly.

Another part of your credit score takes into consideration the average age of your accounts--the older the better. Contrary to popular belief, when you close an account, the "age" of that account still counts toward your average account age. It stays on your report for 10 years counting toward the average age. Similarly to payment history above, when it drops off you will not be affected because you will likely have other accounts since the closed one that will keep the average age from changing very much.

Finally, your credit score is also based off the "mix" of types of credit you have (credit cards, loans, mortgages, etc.). Having multiple types of accounts show you can be responsible with different types of credit. Most people have more than one credit card, so as long as there is at least one revolving account still open, closing one will not affect the "mix" of accounts significantly. Also, this makes up a comparably small portion of your credit score.

In summary... Closing a credit card account will not typically hurt your credit score, but it won't make it any better either. Before choosing to close a card:

• Be sure it will not impact your utilization ratio significantly (less than a 10 percentage point change)
• Know it is not your only revolving credit account
• Understand the long-term effects, but know they will not happen you for at 10 years and will probably be insignificant

From a financial standpoint:

• As others have mentioned, in a dire emergency, you can rely on an open credit card for quick access to funds. For example: the bank freezes your accounts for a few days and you have no cash.
• Card rebates and discounts. For example: Sure, you could close that Macy's card, or leave it open with no balance and take advantage of a 10% discount each time you shop there. Then pay it off immediately, of course.

[disneysteve]

Originally Posted by Thriftina

Keeping the cards will only tempt you to charge when you don't have cash.

I think this is the most important sentence in your post. IF you are the type who is tempted to charge because you possess a credit card, by all means, get rid of it. I'm a firm believer that some people should not own a credit card because they can't use them responsibly, only charging things they would be buying anyway and can afford to pay off in full each and every month.

[MonkeyMama]

I think it's important to keep some available credit - good scores are useful for insurance rates, job hunting, etc., etc.

That being said, keeping old cars open? Over rated. Last time I closed an old card my score went up 30 points. !! I always close my old ones and keep my newest one or 2 cards open. My scores averages 800. I think my mortgage is a much higher piece of my score - has been for many years. I've closed all my credit cards that are older than 3 years.

In your case, I'd close all but one or 2. If the temptation is too great - at least cut them up so you can't use them.

I'd also be concerned with identity theft - I've been there - and I don't want to keep track of the 10 cards I've had (I've opened a lot of cards in the past for rewards - and dropped my first cards when they started charging fees, etc.). I don't want to look at 10 credit card statements every month to make sure no one is using my card - would be ridiculous.

[Radiance]

Maybe credit cards benefit the score only if they are regularly used?

I have a master card in the drawer, when I got it paid off, HSBC reduced my limit from 3000 to 1000.
I have a care credit card for 5000, paid for. This one is good only with health related providers. They didn't lower my limit.
I have an amex (revolving) that I had paid off at some time, when I did, they reduced my limit from 5000 to 1000. I have since used it and have a 600 balance.
I have a visa with 5000 limit, I had taken it down to 2000, they never touched my limit and this is a 14% card. Since then I had a car deductible and ER deductible so I put $600 additional to it. I don't currently have an emergency fund,..

I think I am closing at least the master from HSBC, I have not used it in over a year and it is 22%. As Monkey mama says, one less statement to worry about.