Debt is paid off !!! & a question about closing credit cards

[HundredK]

Hi all, been a while. Thought I'd give a quick update and let you know that we did it! We're 100% debt free, and have paid off $162,000 since I started keeping extremely detailed records back in 2019. Along the way, after going without a car at all for an entire year, we bought a new car with cash (at such an incredible deal that it's still worth more than what we paid)... and it was a much more reasonable $25k car than the $50k car we used to own. Wow. What a relief. And y'all helped set my course, so thanks for that! Anyway, we now find ourselves with a whole lot of useless credit cards. I've always been one of those people that says "I'll never close a card and will use all of them periodically to keep them open". But really, we have too many and I think it would feel good to close all but a few just so it feels tidy and so they aren't lingering and open to identity theft and yada yada yada. I've done a lot of reading and I know that when you close an old card, that'll eventually take a hit on your score (it still stays on your report for 10 years though). I'm not worried we might use them, nope, I can't see that ever happening again after all we've been through. I just really don't want them there anymore. And we have gotten very good at using a few key credit cards to maximize our cash back and I'm pretty happy with our strategy there... and I always pay the statements in full the day before the statement closes, so it reports 0% utilization, no worries about a closed card causing higher utilization. So what would you do with the other cards that feel useless? How many cards do you keep active? Hope you're all doing well!

[disneysteve]

Congratulations! That's fantastic. And thanks for coming back with an update.

As for the credit cards, it's best to keep the oldest accounts open so if you have ones that you haven't had as long, I'd cancel those first. Personally, we have 4 cards we use regularly. Over the years we have had others. I don't think I've actually ever cancelled one but after an extended period of inactivity, we have had the company close our account.

[myrdale]

Amazing job!

To pay off that quantity of debt in that short of a time frame, I assume either you sold quite a bit or have an amazing income, or both!

Personally I am split keeping credit cards. I have two store cards, The Home Depot and Lowe's. I have about an $8,000 limit on both, but seldom ever put more than $300 on either and always pay off in full every month. As Disneysteve said, keeping the oldest account open is a good starting point.

I know you're credit score is affected by the age of your oldest card. That said, I don't know to what extent. Is a 7 year old account, in the eyes of the credit unions equal to a 25 year old card?

I think I would also prioritize only on the cards that stand to get you in the least amount of trouble.

[disneysteve]

I would also add that if you are now debt-free and intend to stay that way, the impact of closing a credit card is really insignificant in the grand scheme of things. Does it really matter if your score drops 10 or 20 points if you aren't applying for any new credit?

[HundredK]

To pay off that quantity of debt in that short of a time frame, I assume either you sold quite a bit or have an amazing income, or both! ... I think I would also prioritize only on the cards that stand to get you in the least amount of trouble.

Thanks! Yes, we have pretty good income, but we always have and still somehow got in all that debt. So I think the biggest change was committing to MASSIVE life changes. I have zero worries about getting into that sort of trouble again, we have plenty of liquidity now and definitely know to not accrue or carry debt, not for any reason.

I would also add that if you are now debt-free and intend to stay that way, the impact of closing a credit card is really insignificant in the grand scheme of things. Does it really matter if your score drops 10 or 20 points if you aren't applying for any new credit?

Thanks Steve! And yeah, that's what I'm thinking too. It really doesn't matter. Our scores are plenty high and could sustain quite a hit and still be excellent. In fact, I don't even believe there would be immediate impact at all... I think that would happen 10 years down the road when those now closed accounts fall off of our reports and we lose the aging (vs if we keep them open, then in 10 years they'd still be there plodding along with increased aging). So I'm trying to think ahead as to whether that will bother me then and I'll wish I'd kept them open. I don't THINK so, but I'm not sure.

[disneysteve]

Keep in mind that paying off all of your debts will result in your credit score dropping a bit. After we paid off our mortgage (which was our only debt), our scores dropped 30-40 points and have stayed there ever since.

[HundredK]

Keep in mind that paying off all of your debts will result in your credit score dropping a bit. After we paid off our mortgage (which was our only debt), our scores dropped 30-40 points and have stayed there ever since.

Ah yes, we went through that already. We actually ended up paying off our loan balances a while back and there was a drop in the score from not having installment loans. We paid those first because we'd pushed our credit card debt onto zero interest cards, so we methodically paid everything off in order of interest rates. I think we've gone through the worst of that though. So cool that you're mortgage free, I don't think I knew that, congrats!

[disneysteve]

Ah yes, we went through that already. We actually ended up paying off our loan balances a while back and there was a drop in the score from not having installment loans. We paid those first because we'd pushed our credit card debt onto zero interest cards, so we methodically paid everything off in order of interest rates. I think we've gone through the worst of that though. So cool that you're mortgage free, I don't think I knew that, congrats!

Thanks. We paid it off in August 2019. That was the only thing we owed. I bought a "new" car last month with cash for the first time. That was neat.

[Fishindude77]

Congrats on the big debt pay down !

Credit cards are just pretty darned handy to have for certain purchases, traveling, etc., so long as you pay the bill in full every month. We keep two credit cards, a CITI Mastercard that pays back 2% cash on all purchases and a Cabelas Visa. The CITI card gets the majority of the use, however we keep the second card because on a couple occasions I've had my card frozen due to fraudulent purchases. This could put you in a bind traveling, so we keep the second card.

[disneysteve]

Our "main" card is the Marriott Visa because normally, we travel a fair amount and love earning free stays. Thanks to Covid, we haven't gone anywhere since February and we've got over 500,000 reward points, a free night certificate, and $3,000 worth of Marriott gift cards (bought when they were on sale for 20% off) so once the world reopens, we've got lots of free or already paid for travel to catch up on.

We also have a Chase Freedom card. We use that primarily for the quarterly 5% cash back bonus categories. We also each have a Discover card and same with that, just for the 5% deals.

[riverwed070707]

Our "main" card is the Marriott Visa because normally, we travel a fair amount and love earning free stays. Thanks to Covid, we haven't gone anywhere since February and we've got over 500,000 reward points, a free night certificate, and $3,000 worth of Marriott gift cards (bought when they were on sale for 20% off) so once the world reopens, we've got lots of free or already paid for travel to catch up on.

We also have a Chase Freedom card. We use that primarily for the quarterly 5% cash back bonus categories. We also each have a Discover card and same with that, just for the 5% deals.

Sorry to thread hijack but I signed up for the Bonvoy this year and I am FLOORED at how quickly you accumulate room nights toward status. Wish I would have gotten one so much sooner! Last year I was booking staycations in December because I thought I was going to lose my platinum status. This year I've already hit it and I haven't even traveled!!

[scfr]

My 2-cents: Keep the oldest card, keep the ones you use regularly for the rewards, close the rest. Closing cards will have an impact on your credit score, but it is low. Credit age is medium impact, which is why you may want to keep the oldest one open for now. If you no longer use the oldest one, you may decide to close it later.

I have 5 cards. 4 I use regularly*, and 1 will be closed soon because it was opened for a bonus. I open & close cards pretty regularly (for bonuses), my oldest card is only 3-1/2 years, and my credit score is in the low 800's. Good enough for me. I don't need a perfect score.

*I used to have 3 that I used regularly, but because of the pandemic I added a Walmart card because they have outstanding curbside service in my area and I get 5% cash back. I think that credit cards are like any other personal finance matter. You need to revisit it periodically and make sure that what you are doing is still the best fit for your situation.

Most of all, I want to say congratulations on the fantastic progress! And thank you for sharing that it is possible, and may be beneficial, to go without a car for a while.

[disneysteve]

Sorry to thread hijack but I signed up for the Bonvoy this year and I am FLOORED at how quickly you accumulate room nights toward status. Wish I would have gotten one so much sooner! Last year I was booking staycations in December because I thought I was going to lose my platinum status. This year I've already hit it and I haven't even traveled!!

I think they've been generous this year due to Covid, given some extra perks, extended expirations on things, etc. But yes, we honestly accumulate points faster than we can use them even before Covid. They also run periodic specials where you get bonus points (6x or 10x) on certain categories. Right now it's restaurants. Once travel is a thing again, we definitely need to spend some time at a few Marriotts.

[sblatner]

I keep old accounts unless they charge a fee. I don't keep the cards but don't bother closing either. If they charge a fee and I'm not using, I cancel. I don't worry about a credit score. If you have good credit and close an account, it will drop a little but then go up again.

[disneysteve]

I keep old accounts unless they charge a fee.

Great point. If any of the cards charge an annual fee, get rid of them unless you really get something of value for the fee. We pay a fee for our Marriott card but it's well worth it, but the fee on most cards doesn't really get you anything.