Is Canceling a Credit Card A Good Thing or a Bad Thing?
There are many things to consider before you actually take that step toward canceling a credit card. Canceling one of your credit cards could be a good thing.. or it could very well be a bad thing. Sometimes, canceling a card can do more harm than good so it is best to weigh all of the pros and cons before making that decision.
Canceling a Credit Card – Is Your Card Lost or Stolen?
This seems pretty obvious.. however, there are many people who do not realize that a lost or stolen credit card is a disaster waiting to happen if action is not taken immediately. If you think you have simply misplaced your card.. don’t wait several days to see whether it might turn up.
Contact your credit card holder immediately and ask them to cancel your card and provide you with a new one. It may be that you find your lost card under the couch in another few days or so. However, it is not wise to take the chance that you may have accidentally left it at the grocery store and now someone else has possession of it.
It may seem like a hassle to order a new card, but a few days of inconvenience is nothing compared to years of trying to recover from the nightmare of identity theft and thousands of dollars in costs.
Canceling a Credit Card When You Have Too Many Cards:
Some people collect credit cards like children collect sports cards. As long as you can afford to make the payments on time and actually use each of the cards periodically, then it is may actually be a benefit to your credit rating.
However, if you have several credit cards that have not been used in quite a while, it may actually be damaging your credit score and also puts you at higher risk for identity theft.
You may have cards you do not use because the credit limit is too low, the interest rate is too high or the cards offer no real benefits.
If you have plenty of other cards you actually prefer to use, canceling at least one of those cards you never use could be a good idea. You may be able to increase the credit limits on the cards you actually do use to offset the loss of available credit on the card you are closing.
The Benefits of Keeping Your Credit Cards vs Canceling:
Maintaining Your Credit Lines:
Having available credit is an asset that is pretty much necessary in today’s economic world. If you are looking to purchase a car, a home, a boat, or just about anything.. lenders will take a look at the amount of credit you have, as well as the type of credit you have, to help them make a determination as to your credit worthiness.
If you don’t have many open credit lines, they have less information on which to base their decision and may very well turn down your application.
Credit Score or Credit Rating:
Older credit cards that are in good standing actually improve your credit score. The longer you have a credit card and make on-time payments, the better your interest rate will become over the years on that account.
Although you do not necessarily need to have a wallet full of credit cards, having a few that are always paid on time increases your credit score. On the other hand, if you have a lot of older accounts that do not have a balance and are still open, this may actually harm your credit.
This is why it is important to rotate your credit card usage.. showing at least some modicum of activity on all open credit card accounts.. at least within the last 6 months.
This way your credit report will show you are a viable client with plenty of available credit and in good standing with all your credit card issuers.