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Credit card question....
So I am curious about when you pay them off what do you do with them? Do you pay them off and close the card? Or do you pay them off anf just keep the card but never use it? Or third option, do you pay them off but always keep like a $50 charge on there and pay it off every month?
I am curious because I am trying to pay down my credit cards and one of D's friends mentioned the other day he just keeps a low balance on it and pays it off every month because it is better for your credit. I don't see how it could make much of a difference. I have a ton of CC from stores (Victoria's, Maurice's, Express, etc) and I haven't carried balances on most of them for almost a year. None of them are closed (technically) but I haven't used them for some time.
What is the best thing to do with credit accounts? My credit is pretty good so I am not concered about it hurting it (because what is a zero balance, not being used credit card going to do???).
Advice...opinions??
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Re: Credit card question....
we used to have CC that we used every month and just paid off at the end of the month, which is good for your credit, but then we met Dave Ramsey and cut up all the cards and closed the accts. It does hurt your credit when you do that because your debt to credit ratio is smaller, but we didn't really care. Plus, from what I understand, it is only a temporary hit. A lot of places, especially stores will just close to acct out if it hasn't been used in so long.
I think the best thing to do depends on your goal. If you are afraid that if you keep the cards open you will be tempted to use them, I say close the accts. If you are worried about your credit rating then keep them open, but if you are not planning on borrowing money in the near future, I would close them just so you don't have to mess with them anymore.
It is actually best for your credit to use the card but ONLY make the minimum payment each month which is kind of the exact opposite of getting out of credit card debt.
When calculating your credit scores, the Big Three look at the amount of credit available to you. If you have a lot of unused cards, this amount can kill your credit score. My advice is to have one card for emergencies but cancel all of the others. Also as a word of caution: Canceling credit cards is VERY difficult - be prepared to have to fight for your right to cancel them!
P.S. It DOES NOT hurt your credit to close the cards - it DOES hurt your credit if you leave them open forever, never use them and the credit card company closes the card. CANCEL THEM.
Tavia, closing the credit cards does not hurt your credit. Having cards you do not use hurts your credit because of the amount of credit available to you.
The best way to boost your credit score is to use the card. The next month, pay the minimum. Then, use the card. The next month pay it off. Use the card. The next month, pay the minimum, use the card, then the next month pay it off. Or, if you want to get really risky - the easiest way to spike your credit drastically is to use the card, pay the minimum, use the card, pay the minimum, use the card, and pay the minimum..then pay it off. It really depends on how quickly you need a boost in your score.
If you are feeling sassy, have someone at your bank run your score. Try scenerio two above for around five months, then have your score run again. SPIKE.
I totally agree! When we canceled all of our cards a few years ago some of the companies were easy, but most of them put up a fight. I had to talk to lots of different people and they offered me this or that to stay. It was crazy!
I closed all of my unused cards about four years ago (my bank suggested that I do this due to the reasons I mentioned above). It took me one hour and fifteen minutes to close my Macy's card. MACY'S. I used the card ONE TIME - ONCE - I am not sure why they wanted my business so badly, its not like they were making any interest off of me.
IT IS ILLEGAL FOR THEM TO NOT ALLOW YOU TO CANCEL THE CARDS. IF THEY WON'T LET YOU CANCEL THREATEN LEGAL ACTION.
I've never heard this before--do you mind explaining why?
Having ONE CARD you do not use will not hurt your credit, its having multiple cards with open available balances that hurt your credit.
We haven't used a CC in 4 years and I didn't close them out until a year or two ago. My credit score dipped a bit after I closed them all out but other than that, it has been the same (and pretty high). I think the whole FICO scoring thing is totally wonky.
We have one amazon card that we use to order from amazon (I buy a lot from there that we subscribe and save to -diapers, toothbrush heads, body wash, etc) and we earn reward points but it gets paid off every month.
We have a Best Buy card that our fridge and TV are one but it will be paid off in a few months and it's interest free for another 2 years or so.
Man, when something is interest free I ride it out the entire period!