I put myself into a really crappy financial situation with $40k in credit cards. Several years ago, I took out a personal loan to pay off what was then $20k. Through a series of shitty decisions, I ran the balances up again. I was paying about $1,300 a month just in minimum payments so I was making very little progress on paying down balances. I recently took out another loan with a much, much lower interest rate and APR to pay off the cards and I want to be done for good…which means getting rid of these things. The new loan is $1,100 a month for 36 months. I have 3 that I would like to keep only because of the length that I’ve had them (20 years). I make roughly $150,000 a year without working overtime. My credit score is 690.
I have worked very hard to change my attitude toward money. I went through all my finances with a fine tooth comb, including finding some investments from old jobs I completely forgot about. I got rid of my 2nd car (that was paid off, but not reliable to commute as far as I do for work…10 years old and 270,000 miles…I have an hour commute each way), which means saving on car insurance, found a new car insurance company to lower my rates, cut cable and went with GoNetSpeed for $40 a month (vs $267 I was paying for cable and internet), cut out all subscriptions except Netflix (which my kids watch regularly), and drastically cut down on my grocery bills. I sold all my kids’ old clothes and sports equipment and don’t buy anything that is not necessary (no more “I earned this” purchases). I order a monthly box from the local food bank for $20.50 a month and buy all my other necessities from Aldi’s or Dollar Tree. I have a strict $175 a week grocery budget that I have been sticking to for the past 6 or 7 months.
So, my question is, does canceling credit cards really make THAT much of a difference? How long would the hit to my credit last? I didn’t work this hard to make major changes just to have temptation ruin it again.
Is it really THAT bad to cancel credit cards?
byu/Destin2930 inpersonalfinance
Posted by Destin2930
28 Comments
No need to micromanage credit: https://reddit.com/r/personalfinance/comments/11jzhcz/_/jb51g23/?context=1
AAoA: https://reddit.com/r/personalfinance/comments/14w4xkl/closing_a_cc_and_credit_score/jrg4zqq
If you’re too irresponsible to use credit cards, you should absolutely cancel them
do you want to cancel every single credit card you have?
or do you want to cancel the least used cards and keep a few on hand to maintain your credit score & for general money management
If not having credit cards is what it takes to prevent you from getting back into credit card debt, then you absolutely should cancel them and never get one again.
Cancelling a card here and there is not the end of the world. Cancelling all of your longest running cards would be a major impact though.
It lowers your credit score, but it really depends on your life situation if your credit score matters. For me personally I work for a family company, and I had a 800+ credit score. Literally couldn’t get a mortgage because I was deemed to high risk to lend too because all my paystubs were signed by my mother and all of our employees had the same last name as me. Came to realize that for my situation credit score doesn’t mean a fucking thing so I stopped paying attention to it.
Sorry for the tangent but basically if you think you’ll need your credit score to be high in the near future to finance a house or car then maybe keep the cards. If the answer no then cancel them.
My score is in the 700s now because I like to play the rewards game with credit cards and I cancel them frequently
At this point, a credit score doesn’t matter. By the time your loan is paid off, it would have recovered.
You make 150k.
Why cant you pay them off this year?
I have 20 credit cards, only one of them has an annual fee that I get value out of. And I have never paid a cent in interest because I used them like cash.
Like certainly people can get caught in traps or have bad timing of cash flow (like health or job loss) that causes debt to pile up, but you make 150k.
It is really about average length of credit. It will drop a bit if you cancel a card you have had for a long time. But if that helps you practice better discipline, I say go for it
Honestly, your credit score only really matters if you’re planning to apply for a loan soon. If you aren’t, don’t sweat the numbers too much.
The main reason people advise against canceling cards is utilization. When you close an account, your total “available credit” drops. This means your monthly spending suddenly looks like a much bigger percentage of your limit, which can tank your score. General wisdom is to keep that usage under 20% if you can.
Before you cancel anything, have you considered just cutting up the physical cards or sticking them in a safe? That way, the accounts stay open and help your score, but you can’t actually use them for impulse buys.
If you absolutely have to close some to clear your head, at least keep the oldest ones. Those 20-year-old accounts are doing the heavy lifting for your credit history; losing them would be the biggest hit
Get rid of them if you are tempted.
Unless you are planning to buy a house in the near future then your credit score is meaningless.
I was a wastrel when I was younger but I turned things around in terms of my mindset and so now I use my credit card for almost everything but I pay it off every month. I don’t buy anything unless I could write a check for it that day.
I sometimes check my credit score and it bounces around a bit based on whether I have a balance on my card even though the balance isn’t due or overdue and I haven’t missed a payment on any card or been late.
Credit cards are just payment methods. Keep as little as necessary. 20-year-old accounts with $20k is good. One backup. Done. Your credit score is not 690 because you did not have enough credit cards. Simplify your life and all else will follow.
Canceling will cause your credit to tank even more. Just stop using them if you really have that poor self control. Cut them up and let the accounts close from lack of use.
I canceled a credit card, credit score didn’t change 1 point
My philosophy is to fix your psychology so that you can exploit the rules to your advantage without falling victim to… your psychology.
Credit cards aren’t free money. They can be a tool to get a little extra money on cash back or whatever. Keeping them open helps your credit score, which opens up other advantages.
Just don’t treat them as free money. Be their master, not their servant.
And you cancel a credit card your overall credit history changes depending on the length of time you’ve had that credit card. It’s one of the factors that affects your credit score
I would cancel all your cards except two. Keep at least one of the older ones and choose a 2nd that has some sort of benefit, whether cash-back or a loyalty program you can use. Neither should have annual fees or foreign transaction fees. At least one should be Visa or MC. Choose cards from two different issuers.
It’s hard to function in this world without a credit card and having a backup is important in case one is lost, hacked, or cancelled by the bank. Visa and MC are most widely accepted. No FTC is important if you ever travel outside the US. Diversifying between issuers prevents all accounts being restricted at once, which can happen through no fault of your own.
Closing accounts will have a temporary impact on your credit score as your total credit limit is reduced. It will rebound quickly if you use the remaining cards responsibly. I don’t know if it makes a difference whether you cancel five at once or over a number of months, but my guess is spreading out the cancellations will look better on your credit file.
You always want to keep your oldest card.
Keep additional cards that cater to your specific uses.
Cancel everything beyond that.
In reality you should just cut up all the physical cards instead of cancelling them. You won’t take any hit to your credit if you don’t cancel all the lines of credit. That said, if they’re saved in your phone and you’re concerned you’re still going to use them then yea cancel the card or go through and manually delete all the saved cc’s from your phone.
The fear of cancelling cards is *vastly* overblown. It’s a small percentage of your credit score makeup and even utilization isn’t that important if you’re paying your card off every month like you should be. I open and close cards all the time and have a 840 credit score, I’ve just pay everything on time.
Also closing a card doesn’t even directly impact the average age of credit. “closing accounts and paying off loans in full caps the payment history for those accounts, but it doesn’t immediately cancel out their ages for purposes of calculating length of credit history. Accounts you close in good standing (meaning with no late payments) remain on your credit report for as long as 10 years”.
I’d just cancel them all except for one. Especially in your situation where keeping your finances in order is waaaay more important than worrying about a small change in credit score. In fact based on your history you might consider just cancelling them all and only use a debit card until you’ve proven you can handle it.
You can shred your card without canceling it. Turn it off in the app, shred it and think of it as gone. If that doesn’t work for you then just cancel it and take the hit.
I don’t think it’s much and I think 7 years is the longest it would last. I know I canceled at least one or two cards when I was younger and didn’t know about credit scores and didn’t notice any effect. If you don’t need to apply for a loan immediately, who cares what your score is.
Freeze the accounts AND cut up all the cards so that you would have to wait a week+ for a new card if you had the urge to use one.
If you think that still won’t be enough, keep the oldest one and the one with the highest limit (if different) and cancel the others. Maybe set a small bill, like your Netflix or a phone or internet bill, on autopay from each card, AND also set up an automatic card payment for the same amount from your bank account on the same day (so you are basically prepaying your CC bill and not creating debt) before you cut them up. Then forget they exist, other than to make sure the bill amount/amount you pay to CC doesn’t need to change.
In a couple years when you DO need a good credit score you will be really happy to have a higher score based on the age of credit, utilization ratio, and history of regular payments.
If it is an older card it will reduce the length of your credit history, which may impact your credit score in the short term. If it had no balance on it, you’ll be increasing your overall credit utilization, which will impact your credit score until you pay stuff off. But if your problems stem from spending up your available credit, then your credit score is a very low priority.
People are obsessed with credit score optimization. As if your score matters more than any other consideration.
Just get rid of em if they’re not helpful.
Its only bad for the credit card company because that means no revenue for them. So they make it seem like it’s a bad thing when a consumer does it.
OP, I’m with others that are saying cancel them if it helps with your finances. Remember, Finance over FICO.
Also, ignore anyone that say it will hurt your credit (especially your AAoA) if you do cancel them. And that it doesn’t matter if it’s your oldest/second oldest or the limit on it- cancel and be done with them. This [comment](https://www.reddit.com/r/CreditCards/s/A17H1aCKEJ) will explain more + a recent [DP](https://www.reddit.com/r/CRedit/s/vLQKIhWU6P).
If you’re keeping 3 cards open, nope it will hardly make a dent.
If you’re keeping them for credit history maybe keep 3 cards from 3 different banks as insurance, and call them up ask to lower the credit limit to $5k on each account.
Don’t even stress too much keeping the oldest account if you don’t want to. Especially if it’s something like a useless Macy’s store card, has an annual fee, etc. Closed accounts stay on your credit reports up to 10 years and continue to contribute to your credit age.
Even if you keep your NEWEST 3 accounts by the time 10 years passes and the closed accounts fall off you’ll hardly see a difference in credit scores from 10 years vs 20 years age of oldest account.
If you cut them up they still exist. You still need to monitor the statements for fraud. You can get hit with late payments that will cause 10x the damage to your credit and drop your scores 50-100 points vs maybe a 10 point fluctuation for closing an account. Even autopay is not a sure thing, issues happen. You change banks and forget about the card for example.
My favourite strategy was yo take 0% interest for one year credit cards, move the balance and then pay off the capital as fast as I could. Even the amount you pay now is good as it pays towards the capital and nothing is wasted on paying interest.
You can always take personal loamn if needed. Keep only the oldest cc