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Can I safely cancel a CC?

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    Can I safely cancel a CC?

    We have too many credit cards now. We pay off every card each month but really only use our American Express now for the 1%,2%,3% cashback and Costco purchases. I have a BoA Alaska airlines card that charges $75 a year that we used to use for airline miles, but now that it has 200k points on it I stopped using it for fear they might one day say, oops, we are discontinuing this program, say bye to your points. I think they have already been deposited into the Alaska airlines milage program (should check that) so are probably safe if I cancel that card.

    The problem is we have a ok credit score (787) and I don't want to mess it up by doing the wrong thing. Most of the cards have around a 15k to 20k limit, maybe 70k in all?

    I would be happy with just 1 or 2 Visa/Mcard and the Amex. We currently have 6 cards total. A pain in the butt to check them each month to make sure there is no unauthorized charges.

    So...leave them open and don't use them, or just cancel them?

    #2
    In general, it's easiest to keep them open to be sure your FICO won't be affected. However, if it annoys you to keep them open, here's instructions to figure out if it will affect you.

    1) Determine your total balance reported to the credit bureaus for revolving accounts. Credit cards, unsecured loans only.
    2) Determine your total available limit on all those tradelines from above.
    3) Calculate your overall utilization percentage (#1 divided by #2).
    4) Determine your new total available limit, ignoring the cards you wish to close.
    5) Calculate your new overall utilization percentage (#1 divided by #4).

    Compare your current and new percentages. The new one will be higher. If it's less than 10% higher than the previous, cancelling those cards will not significantly impact your FICO. The higher the percentage is, the lower it potentially reduces your score.

    Comment


      #3
      Depends on your utilization, etc., etc.

      My personal rule is close the old card when I open a new one (always leaving at least 2 open). Regardless of length of credit card. I've always had a score in the 800 range. (I have a mortgage that seems to be bigger piece of score anyway - full disclosure).

      Anyway, I closed an old (paid off a few months prior anyway) 0% balance transfer card in December and my FICO went up 30 points. I think the "never close your card" thing is officially over-rated. I knew from experience it wouldn't amount to a hill of beans in the long run. But the short term effect was shocking, for sure.

      Comment


        #4
        I doubt it will have much of an effect since you have quite a bit of credit available.

        You can investigate it by signing up at creditkarma.com. It will give you an estimated Transunion credit score (not identical to FICO, but probably a good ballpark). They have a Credit Simulator where you investigate the effect of different actions on your score (close an account, open an account, pay off balances, etc). It's pretty cool, although I can't vouch for the accuracy.

        Comment


          #5
          Yes, you can absolutely close a couple of your CC's "safely". First, from what you've said, it doesn't seem that it would be a major hit to your score anyway, and it would repair itself quickly as the months draw on. Also, you already own a home, college education, sailboat, cars, ... is there anything in the coming year or so that you expect to need a high credit score for? If not, then I wouldn't hesitate to close 1, 2, or even 3 of the ones you have but don't want.
          "Praestantia per minutus" ... "Acta non verba"

          Comment


            #6
            Could have a small negative effect on your score, however each account you have open exposes you to identity theft risk. I prefer closing accounts I know I'll never use again.

            Comment


              #7
              Thanks for the replies. I think I will close out 2 of them for now.

              As to if we really need a good score, as an example of what it gets you, I was able to get a no cost, no points refinance of my home mortgage for 5.25% from 6%. Nothing out of pocket from me and reducing my interest rate 0.75% is a valid reason for maintaining a decent score even when I don't need any other type of financing (we paid cash for all of our cars...actually, I put a 2008 Toyota Tundra on the Alaska card and instantly got a free airline ticket with the points I made ...but don't be in horror, I sent a check to the CC company to pay the balance the next day.)

              Now I get reamed for buying a new truck instead of beater. In my defense, my previous truck was a 1992 Ford F150 that I put over 200000 miles on.

              Comment


                #8
                Originally posted by KTP View Post
                Now I get reamed for buying a new truck instead of beater. In my defense, my previous truck was a 1992 Ford F150 that I put over 200000 miles on.
                Meh....
                "Praestantia per minutus" ... "Acta non verba"

                Comment


                  #9
                  I'm not sure who's reaming you for buying a new truck. Personally, I think it's fine to buy a new car every 8-10 years if you don't carry a lot of other debt. I just wouldn't recommend it to someone who is struggling under credit card or other consumer debt.

                  Comment


                    #10
                    Wow, I can't believe they let you pay for the vehicle with a credit card. I had a roommate in college who did that, but it was for like a $6000 car, not a new Tundra (I assume the Tundra cost more than that...).

                    Good for you on the miles! My 2003 F150 has 147,000 right now.

                    Comment


                      #11
                      That 787 credit score is great, so I can see why you had no problem refinancing. I track my score using Equifax, and they have a table showing ranges of credit scores for the different mortgage interest rates. Anything over 760 is the top tier, best rates. So it looks like there's no reason to fret about the small affect of closing some accounts.

                      Comment


                        #12
                        Originally posted by KTP View Post
                        We have too many credit cards now. We pay off every card each month but really only use our American Express now for the 1%,2%,3% cashback and Costco purchases. I have a BoA Alaska airlines card that charges $75 a year that we used to use for airline miles, but now that it has 200k points on it I stopped using it for fear they might one day say, oops, we are discontinuing this program, say bye to your points. I think they have already been deposited into the Alaska airlines milage program (should check that) so are probably safe if I cancel that card.

                        The problem is we have a ok credit score (787) and I don't want to mess it up by doing the wrong thing. Most of the cards have around a 15k to 20k limit, maybe 70k in all?

                        I would be happy with just 1 or 2 Visa/Mcard and the Amex. We currently have 6 cards total. A pain in the butt to check them each month to make sure there is no unauthorized charges.

                        So...leave them open and don't use them, or just cancel them?

                        I would leave them open, but only make 1 or 2 small purchases on them a month, while using your other cards for the day-to-day purchases...and make sure you pay off the CC's you stopped using in full as soon as possible

                        Comment

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