Leaving a balance on credit cards for fear of them being closed...

[MITGrad]

I've been hearing a lot lately of folks having credit cards closed once they pay the balance off. My wife and I have 1 CC each, and the combined credit line amounts to about $40,000. The balance on each card is about $50, left there for the sole purpose of not getting the cards closed on us.

The problem with this scenario is that we're obviously paying interest on that balance each month, not good.

Is the fear of having the accounts closed real? Is there a better way to handle this?

Thanks in advance for any help!

[sfalexi]

Not to probe....but do you NEED 40,000 dollars worth of credit? Are you guys debt free and can you build up savings to pay for stuff with cash or debit? I have a few credit cards, but once I'm debt free, I'm gonna keep one credit card with 5k limit on it. I dont see myself every needing more than that.

[Broken Arrow]

Well, I'm of the personal opinion that you should use a credit card that best suits your personal finance, regardless of any potential, unintended consequences by credit card companies.

A reputable company will not close it on you. If they do close on you, then you don't want to give them any business anyways.

To me, leaving a balance to prevent closing is to have the tail wag the dog.

[disneysteve]

The fear of the account getting closed is real - it can and does happen. But in no way does that justify paying interest every month. The fact that you have a balance does not prevent them from closing your account anyway so you aren't even accomplishing what you think you are.

[disneysteve]

Not to probe....but do you NEED 40,000 dollars worth of credit?

Between our 2 Visa and 2 Discover cards, we are somewhere around 100K in available credit. We certainly don't need it and will never use it, but it sure makes keeping our utilization ratio really low quite easy.

[gertymac]

I would suggest getting a card through your credit union or bank. I think they are much less likely to close on you than a card issued by a credit card company.

Then, you'll have no need to pay interest on a balance kept for fear of losing your cards, and if you do lose your cards you have a back up.

[disneysteve]

I also think that an inactive account is more likely to get closed than an active account. Pay off the balance but continue to use the card regularly. Just pay the balance in full every month, which is what everyone should be doing anyway.

[wincrasher]

Paying interest just to keep an account open is stupid.

All you have to do to keep a card active is to use it once in awhile - like every few months or so. Just buy something you'd normally buy and pay it off when the bill comes.

The likelihood of having your limit reduced, when you otherwise have a low utilization and high credit score is rather low.

[Seeker]

There's really only a few reasons that a company would close out an account:

1) The company is folding, closing or going out of business.

2) The company has a problem with your behavior/credit and no longer wants to take that risk (this is true if you never use the account as well).

CC companies "like" activity, because they get a certain percentage from the merchant for anything we buy with CCs. If we don't pay-in-full, they like us too, but leaving such a small balance on it does not behoove you in their view. They don't care about "small" balances; they only care about large ones.

Any kind of regular use will satisfy the CC company. Wincrasher is quite correct, every few months is enough activity. Or even normal monthly use and pay-in-full each month is activity. Unless #1 happens, they probably won't bother closing your account.

[Seeker]

Also, what you've been reading about is happening to people who have carried forward balances for years-without-end.

People who now are struggling to pay off those balances, because the CC companies have been raising their Interest rates in the face of the new laws going into effect next year.

And people, who, while making the effort to pay down these huge balances, are also facing the lowering of their available credit as they pay those balances down because the CC companies are coming to terms with the fact that they have over extended credit and view these people as more of a risk.

And finally, yes, some of these people are terminating their accounts or having the accounts terminated on them, before finishing paying them off.

[disneysteve]

One easy way to keep the card active is to make one of your recurring monthly bill payments go to that card automatically. Something like your cell phone bill, cable, internet access, auto insurance, newspaper subscription, etc. Something that you pay every month anyway. I have numerous bills that automatically charge to my credit card.

[snafu]

I inadvertently overpaid a CC statement by $7. I've left the credit balance as I have only rarely used the a/c and no longer bank with that organization.

[cinderella2008]

I will not use CD again!

[Joan.of.the.Arch]

I will not use CD again!

Why not, Cindy?

[lovcom]

Not to probe....but do you NEED 40,000 dollars worth of credit? Are you guys debt free and can you build up savings to pay for stuff with cash or debit? I have a few credit cards, but once I'm debt free, I'm gonna keep one credit card with 5k limit on it. I dont see myself every needing more than that.

I think that it is irrelevent what the amount of available credit is. $40,000, $5,000, it don't matter in regard to the OP's question. It is best the have the highest available credit, so long as the holder is not going to run up the balance except for life/death emergencies.

Keeping a balance on a credit card is not going prevent it from being closed.

I think the best way to keep a card from being closed is to just use it frequently, paying off the balance each month so you don't get in trouble.