Why you should not close credit cards – Most of us are faced with the daunting decision of closing our credit card at some time in our lives.It is a choice we cannot make easily without seeing the pros and cons of it.We have to check if it will it affect our credit score inversely or have any other disadvantages before we can go ahead with it.In this article,i will highlight a few points in favor of keeping the cards open rather than closing them.
Many times,there are some credit cards that offer you great benefits on purchases,air tickets, and grocery.Other retail cards that are tied up with big chain retail giants will give you huge discounts and savings on in house shopping.which can be especially useful during the holiday season.All cards have a rewards points system that lets you get freebies with the accumulated reward points.
Gas cards are useful for getting your full tank,and gets you great savings when you use it often to pay for gas.There are some gas cards that are made for people with bad credit,and can be a life saver in such cases.
Some cards also offer “0 annual charges”, lower finance charges or higher credit limits.Take advantage of this and leverage from them.Work the credit system in your favor so that you can draw maximum benefit from it
Overall,credit cards are extremely useful for the many benefits they provide all year around.In each monthly statement there will new schemes that are advertised.All card users should make use of these.
This should have been first on my list as it is easily the most important point here.There is a direct correlation to closing your credit card and the effect it has on your credit score.
- Closing an existing credit card for various reasons shows an inability to make payments on that card.If you are closing the card because you have a large outstanding balance or is totally maxed out and is overridden with penalties and charges.This could have dangerous repercussions on your credit score.
- Making regular,continuous,monthly payments on an active card shows a healthy financial slow of funds on your behalf will be noted in your credit history and in the long run will work well towards giving you a higher credit score.
- An open active credit card with a high balance is still better than a closed card
- Closing an old credit card that has added value to your credit history is a bad choice even though it might have higher finance charges or a lower credit limit.
Keeping atleast one credit card is more of a necessity nowadays.It is not a privilege anymore when almost all the worlds money transfer has now gone digital.We are experiencing a digital revolution where digital payments through card and mobile applications are slowly taking over hard currency exchange.
Almost all online shopping needs to be done only through a credit card and the worlds biggest eCommerce retailer Amazon is making life easier by letting you shop from the comfort of your living room.
Lets face it- A credit card is a life saver,its is quick,easy and convenient cash at your fingertips,not mentioning the safety factor – you cannot get mugged for your plastic money. Bottom-line – Having a card can make your life easier.
Which cards can you close?
If you have more than 2 cards and the third one does not give you enough benefits,rewards or gifts and also charges an annual fee coupled with high finance charges, you can think of cancelling it.Most importantly,if it is a newer card and does not have much effect on your credit score or credit history,its cancellation will not have any impact on your credit score.