Author Topic: Should I close my credit card?  (Read 3893 times)

catmustache

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Should I close my credit card?
« on: December 05, 2012, 10:55:00 AM »
Hi,
I'm fairly new to this site, though it's been exciting to read through a lot of the recommendations. I looked for something on this topic and found something similar but couldn't find the exact scenario. If I missed it, I apologize.

I made a lot of bad mistakes in college and ended up with terrible credit. After graduating, I tried to rebuild my credit by getting a credit card and could only get approved for one with a 23.99% interest rate and an annual fee of $79. It also comes with a minimum interest charge of $1 a month.
So, I've paid down the card and carry no balances on it, but it still costs me $10 a month (annual fees, monthly service fees that I can't cancel, etc.), even doing nothing with it. However, it's also my oldest account and my only credit card. I'd like to improve my credit, but my credit report keeps telling me that the average age of my accounts is too low. I also don't really want to apply for new credit cards because I already have a ton of inquiries on my credit report this year (bought a house, got a car loan, and consolidated some debt).

The question is, do I bite the bullet and keep paying the credit card company or do I close down the account and deal with the fact that all my other accounts are less than 1 year old? Are there any other options I'm not considering properly?

Thanks.

mlipps

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Re: Should I close my credit card?
« Reply #1 on: December 05, 2012, 11:51:39 AM »
If you already have a home loan & a car loan, I can't see what you'll be needing your credit for in the near future. If it's costing you, cancel it. It's just not worth it.

Paul der Krake

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Re: Should I close my credit card?
« Reply #2 on: December 05, 2012, 12:02:08 PM »
Any card that's costing you money must be eliminated. Get rid of it.

catmustache

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Re: Should I close my credit card?
« Reply #3 on: December 05, 2012, 12:40:51 PM »
Makes sense. Thanks for the advice! I don't know why I've paid them for so long.

new2this

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Re: Should I close my credit card?
« Reply #4 on: December 05, 2012, 12:54:12 PM »
When you call them to close it, they usually ask for a reason. Since you've probably improved your score since the time  you were first approved for the card, there's a chance they might waive the annual fees to keep you as a customer. It's worth asking about at least.

wakkowarner

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Re: Should I close my credit card?
« Reply #5 on: December 05, 2012, 02:35:11 PM »
I would say contact them and try really hard to get them to get rid of the fees.  Tell them no fees or you are closing the account.

You want to keep the account because total amount that you can borrow, and age of accounts, affect your credit score.  Which will affect the interest rates you can get.  In a Mustachian lifestyle this will probably only affect your home purchases, but that could be your own home, or rental properties.  Those are pretty large loan amounts, so even a small change in your interest rates can have a big effect.

Good luck!

smedleyb

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Re: Should I close my credit card?
« Reply #6 on: December 06, 2012, 06:17:27 PM »
Hi,
I'm fairly new to this site, though it's been exciting to read through a lot of the recommendations. I looked for something on this topic and found something similar but couldn't find the exact scenario. If I missed it, I apologize.

I made a lot of bad mistakes in college and ended up with terrible credit. After graduating, I tried to rebuild my credit by getting a credit card and could only get approved for one with a 23.99% interest rate and an annual fee of $79. It also comes with a minimum interest charge of $1 a month.
So, I've paid down the card and carry no balances on it, but it still costs me $10 a month (annual fees, monthly service fees that I can't cancel, etc.), even doing nothing with it. However, it's also my oldest account and my only credit card. I'd like to improve my credit, but my credit report keeps telling me that the average age of my accounts is too low. I also don't really want to apply for new credit cards because I already have a ton of inquiries on my credit report this year (bought a house, got a car loan, and consolidated some debt).

The question is, do I bite the bullet and keep paying the credit card company or do I close down the account and deal with the fact that all my other accounts are less than 1 year old? Are there any other options I'm not considering properly?

Thanks.

Don't worry about account age; it's relevant but not critical.

Try to downgrade your card to a non-fee card offered in the banks card portfolio if you want to keep the credit line active while aging it; if they don't allow you to downgrade, or don't have a non-fee card, apply for another CC from another bank and cancel the current card once you're approved.  This year, I applied for 17 credit cards and a HELOC, and was approved each time (the average age of my accounts -- less than one year).  Inquires ding your score by 3-5 points.  Don't sweat them unless you plan on getting another loan very soon.  And even then I doubt it would matter much.
« Last Edit: December 06, 2012, 06:21:03 PM by smedleyb »

Paul der Krake

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Re: Should I close my credit card?
« Reply #7 on: December 06, 2012, 06:25:02 PM »
This year, I applied for 17 credit cards and a HELOC, and was approved each time (the average age of my accounts -- less than one year).
Holy crap dude(tte?), seventeen credit cards? Are you building a castle with them or what?

smedleyb

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Re: Should I close my credit card?
« Reply #8 on: December 06, 2012, 06:30:07 PM »
This year, I applied for 17 credit cards and a HELOC, and was approved each time (the average age of my accounts -- less than one year).
Holy crap dude(tte?), seventeen credit cards? Are you building a castle with them or what?

I derived roughly $700-$1700 worth of airline and hotel points from each.

My wife got 10, too.  lol!

grantmeaname

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Re: Should I close my credit card?
« Reply #9 on: December 06, 2012, 07:19:24 PM »
Even if your credit is absolute shit, your friendly local credit union will likely have a no-fee credit card offer for you -- in fact, the founding purpose of credit unions, since a century ago, has been to provide credit to people who can't get it elsewhere. If you can't get the fee on your current card dropped, that's probably your best option.

My first credit card, with no cosigner, was through my credit union the week after I joined. I had to secure it by depositing a little more than the credit limit and not touching it for the first year I had the card, but my credit score's in the 700s now, compared to no credit score at all when I opened the account. (While you shouldn't run a balance and therefore you shouldn't care what the interest rate on the card is, credit unions also tend to offer lower loan rates than banks.)