If you’ve spent more time in your life learning algebra than you have learning about how credit works (just like many of us), going through the process of credit repair can be very educational. You may have learned that you should never cancel a credit card. However, there are some exceptions to this rule.
In many cases, it’s not necessary to cancel your credit card, even if you never use it. The longer a credit card is listed as an open account on your credit report, the more it can help you maintain a good credit score. We are judged often on our length of credit history, and a low or no balance credit card can help with that. However, there are some good reasons to cancel your credit card. Here are four cases when it’s appropriate to do so:
This is one time you probably not only want to cancel your credit card, but you may need to do so, particularly in the event of a non-amicable divorce. Sometimes couples can run into financial hardship when they divorce, leading to a major dip in both of their credit scores. Depending on the divorce decree, one party may agree to pay the credit card debt, or it can be split in various ways. If there is no outstanding balance, then the best solution may be to cancel the card and avoid any potential trouble down the road.
Rising Annual Fees
We always run the risk of incurring fees whenever we sign up for a credit card. However, sometimes those fees can rise to an exorbitant amount, leaving you frustrated with your credit card company. If you check your credit card agreement, the company likely snuck in a note about reserving the right to do this in certain situations, even if it doesn’t seem fair. If this happens, you are well within your right to cancel your card, especially if doing so will save you money in the long run.
Many people experience difficulty when it comes to spending, and if you are one of them, you may want to consider limiting the ways you can spend yourself into debt. If you have multiple credit cards and can’t seem to stop putting charges on them, then save yourself some trouble and consider canceling it. Just make sure that it has a zero balance when you close it, or else it will impact on your credit score by placing a negative item on your credit report.
Even the most responsible among us might not turn down a credit card offer, especially if it comes with enticing rewards such as double miles, cash back on every purchase, or no annual fees. If you’re unhappy with your current credit card company and get a better offer from another, then it may serve you well to cancel your current card after receiving the new one. Some credit cards also offer zero interest on balance transfers, which may assist you with paying your credit debt down more easily, especially on cards with high balances and high interest rates.
So while it may not always be wise to cancel your credit card, there are some times when it’s not only acceptable, but may actually be a better financial option for you. However, the biggest reason for keeping your credit card open is to build a stable, positive credit history. So, make sure to do your research and weigh the pros and cons before you make a decision. For more helpful tips on repairing your credit, visit www.lexingtonlaw.com.