Cancelling credit cards..?

[amdhunter]

I decided to go ahead and rid myself of credit card debt within the next six months.

I am going to use entire paychecks (every other paycheck actually) to pay off my 2 credit cards. I am planning to make the call this weekened to pay one in full, and cancel it completely. It's gonna feel good.

I'll be able to completely clear the remaining one in about 6 months. I *could* clear it by completely wiping my savings account, but I'd rather hold onto that in case of an emergency.

I haven't used either of my credit cards in nearly a year and a half. I have just been paying minimum balances forever.

I have a question though, before I feel like the credit card company is trying to pull a fast one on me, what should I expect? I expect sales pitches and pressure, but my mind is made up, I don't want any more credit cards.

I asked around and heard from people that I might have to pay cancellation fees, and it can cost upwards of $100. Is this true?

I've also heard that it can actually hurt my credit if I cancel a credit card, or have no debt. I currently do have a car loan that I am paying off, and thats the only debt I have left.

I'd like to also purchase a condo (or house) sometime in 2009, which is why I want to clean my credit cards. Will having no credit cards at all be an issue?

Anyone got advice?

 

[JD50]

Keep your credit card accounts open, its better for you credit I believe, especially if they are older accounts. Just cut up your cards if you are worried about using them.

 

[tw1164]

I've never paid a cancellation fee, never heard of one for a CC.

 

[amdhunter]

Originally posted by: JD50
Keep your credit card accounts open, its better for you credit I believe, especially if they are older accounts. Just cut up your cards if you are worried about using them.

Both cards have annual fees, which I'd like to avoid since I won't have them. I can always re-apply for a no-fee card I guess.

 

[spidey07]

Good for you for coming up with a plan to get out of debt!

There shouldn't be any cancelation fees.

You are correct however that canceling accounts will most like take a big hit on your credit score which could influence your ability to get the loan for the condo as well as the interest rate.

Do NOT cancel the accounts, especially if they are your oldest.

 

[JD50]

Originally posted by: amdhunter

Originally posted by: JD50
Keep your credit card accounts open, its better for you credit I believe, especially if they are older accounts. Just cut up your cards if you are worried about using them.

Both cards have annual fees, which I'd like to avoid since I won't have them. I can always re-apply for a no-fee card I guess.

Oh damn, annual fees, that sucks, I didn't think there were many of those cards around anymore.

 

[Mxylplyx]

Originally posted by: amdhunter
I decided to go ahead and rid myself of credit card debt within the next six months.

I am going to use entire paychecks (every other paycheck actually) to pay off my 2 credit cards. I am planning to make the call this weekened to pay one in full, and cancel it completely. It's gonna feel good.

I'll be able to completely clear the remaining one in about 6 months. I *could* clear it by completely wiping my savings account, but I'd rather hold onto that in case of an emergency.

I haven't used either of my credit cards in nearly a year and a half. I have just been paying minimum balances forever.

I have a question though, before I feel like the credit card company is trying to pull a fast one on me, what should I expect? I expect sales pitches and pressure, but my mind is made up, I don't want any more credit cards.

I asked around and heard from people that I might have to pay cancellation fees, and it can cost upwards of $100. Is this true?

I've also heard that it can actually hurt my credit if I cancel a credit card, or have no debt. I currently do have a car loan that I am paying off, and thats the only debt I have left.

I'd like to also purchase a condo (or house) sometime in 2009, which is why I want to clean my credit cards. Will having no credit cards at all be an issue?

Anyone got advice?

Keep your longest running card open, and just dont use it. I did the same thing as you this past year to rid myself of all non-house debt, which was 1 car and several credit cards. Every time I got paid, I'd wipe myself out again. With the help of a second professional job, I wiped out about $25K in debt in 8 months, and damn does it feel good. You'll have no problem getting the condo, especially if your a first time buyer.

 

[slsmnaz]

Originally posted by: amdhunter

Originally posted by: JD50
Keep your credit card accounts open, its better for you credit I believe, especially if they are older accounts. Just cut up your cards if you are worried about using them.

Both cards have annual fees, which I'd like to avoid since I won't have them. I can always re-apply for a no-fee card I guess.

I think he means it's better because they've been open longer. Looks better to on your credit report.

 

[JD50]

Originally posted by: spidey07
Good for you for coming up with a plan to get out of debt!

There shouldn't be any cancelation fees.

You are correct however that canceling accounts will most like take a big hit on your credit score which could influence your ability to get the loan for the condo as well as the interest rate.

Do NOT cancel the accounts, especially if they are your oldest.

I'm a little curious, why does cancelling credit cards have a negative effect on your credit score?

 

[amdhunter]

Originally posted by: spidey07
Good for you for coming up with a plan to get out of debt!

There shouldn't be any cancelation fees.

You are correct however that canceling accounts will most like take a big hit on your credit score which could influence your ability to get the loan for the condo as well as the interest rate.

Do NOT cancel the accounts, especially if they are your oldest.

I've had them both since 1999.

 

[kranky]

Instead of canceling, ask if they will convert you to a no-annual-fee card. If they do, then keep them. It's better for your credit to have open accounts that you aren't using. Closing them won't ruin you, but it will hurt.

Go over to myfico.com and look at the page for what's in my credit score. Based on that, decide what you want to do. You'll see that if you have no open accounts, it won't help you when you want to get a mortgage.

Of course, this is all relative - if your credit score is 800 now, you'll be fine. If it's 650, you probably can't afford to close accounts and drive your score lower because it will raise the interest on your mortgage.

 

[amdhunter]

Originally posted by: JD50

Originally posted by: spidey07
Good for you for coming up with a plan to get out of debt!

There shouldn't be any cancelation fees.

You are correct however that canceling accounts will most like take a big hit on your credit score which could influence your ability to get the loan for the condo as well as the interest rate.

Do NOT cancel the accounts, especially if they are your oldest.

I'm a little curious, why does cancelling credit cards have a negative effect on your credit score?

I'm wondering the same thing.

 

[spidey07]

Originally posted by: JD50

Originally posted by: spidey07
Good for you for coming up with a plan to get out of debt!

There shouldn't be any cancelation fees.

You are correct however that canceling accounts will most like take a big hit on your credit score which could influence your ability to get the loan for the condo as well as the interest rate.

Do NOT cancel the accounts, especially if they are your oldest.

I'm a little curious, why does cancelling credit cards have a negative effect on your credit score?

Length of open credit.

 

[Strk]

Originally posted by: kranky
Instead of canceling, ask if they will convert you to a no-annual-fee card. If they do, then keep them. It's better for your credit to have open accounts that you aren't using. Closing them won't ruin you, but it will hurt.

Go over to myfico.com and look at the page for what's in my credit score. Based on that, decide what you want to do. You'll see that if you have no open accounts, it won't help you when you want to get a mortgage.

Of course, this is all relative - if your credit score is 800 now, you'll be fine. If it's 650, you probably can't afford to close accounts and drive your score lower because it will raise the interest on your mortgage.

I wasn't aware of companies willing to do that. Is it something many companies will do or just a select few?

 

[Capt Caveman]

Originally posted by: Strk

Originally posted by: kranky
Instead of canceling, ask if they will convert you to a no-annual-fee card. If they do, then keep them. It's better for your credit to have open accounts that you aren't using. Closing them won't ruin you, but it will hurt.

Go over to myfico.com and look at the page for what's in my credit score. Based on that, decide what you want to do. You'll see that if you have no open accounts, it won't help you when you want to get a mortgage.

Of course, this is all relative - if your credit score is 800 now, you'll be fine. If it's 650, you probably can't afford to close accounts and drive your score lower because it will raise the interest on your mortgage.

I wasn't aware of companies willing to do that. Is it something many companies will do or just a select few?

If the customer has a history of keeping a balance and paying a lot of interest(a good customer to them), the cc company would rather keep you as a customer with a no-fee(possibly higher interest rate) card then lose you.

 

[sager66]

4 credit-scoring myths

 

[Kelemvor]

Cancel the cards assuming you have other cards that you use. But if you're worried about it, ask them to note the account that it is being closed per customer request.

No reason to have a card with an annual fee unless you get some major rewards for using it. And I've never heard of a cancellation fee for closing a credit card.

 

[Stiganator]

If you haven't ever used them, there is no point to keeping them, because you never racked up a positive profile, I did this a while back canceled 4 cards from shops that I just don't go to anymore. Didn't affect my credit very much since most of it profile comes from the frequent flier card.

 

[Bryophyte]

If you'll be buying a condo in 2 years, try to keep the accounts open. Call and see if they'll drop the annual fee if you threaten to close the accounts. They probably will, since you've been a customer so long and have kept balances on them.

 

[crt1530]

Originally posted by: kranky
Instead of canceling, ask if they will convert you to a no-annual-fee card. If they do, then keep them. It's better for your credit to have open accounts that you aren't using. Closing them won't ruin you, but it will hurt.

Go over to myfico.com and look at the page for what's in my credit score. Based on that, decide what you want to do. You'll see that if you have no open accounts, it won't help you when you want to get a mortgage.

Of course, this is all relative - if your credit score is 800 now, you'll be fine. If it's 650, you probably can't afford to close accounts and drive your score lower because it will raise the interest on your mortgage.

The best advice you've received thus far.

 

[spacejamz]

Originally posted by: amdhunter

Originally posted by: JD50

Originally posted by: spidey07
Good for you for coming up with a plan to get out of debt!

There shouldn't be any cancelation fees.

You are correct however that canceling accounts will most like take a big hit on your credit score which could influence your ability to get the loan for the condo as well as the interest rate.

Do NOT cancel the accounts, especially if they are your oldest.

I'm a little curious, why does cancelling credit cards have a negative effect on your credit score?

I'm wondering the same thing.

35% of your score is based on the ratio of your total credit balance against your total credit line. If you cancel your card, your total credit line decreases and raises the ratio of your credit balance against your total credit which lowers your score.

if you two card that have $10K credit line on each one and you have $5 of charges on one card, you would $5k against $20K of available credit. If you cancel one card, you would have $5K against $10k which makes you appears less credit worthy.

 

[ViviTheMage]

Originally posted by: JD50

Originally posted by: spidey07
Good for you for coming up with a plan to get out of debt!

There shouldn't be any cancelation fees.

You are correct however that canceling accounts will most like take a big hit on your credit score which could influence your ability to get the loan for the condo as well as the interest rate.

Do NOT cancel the accounts, especially if they are your oldest.

I'm a little curious, why does cancelling credit cards have a negative effect on your credit score?

you have X amount of credit open to you, this is what crediters see. say you have a card with 6000 limit, another with a 5000 limit. that makes it 11000 you have OPEN to you that a bank 'trusts' you with. Say its all paid off and you apply for a car loan, or a mortgage, a loan officer looks at it and says, wow-wee you have some great credit, low debt and a lot of credit available. you will end up with a better rate then if you have 50% of that credit used up, or only 5000 available.

shrug, where's rossman?

edit : spacemanz did a good job explaining it too.

 

[kami333]

And even if you pay your credit card balances in full each month, depending on when your credit card reports to your credit report it will probably show some kind of balance, therefore the higher available credit can still lower your debt ratio.

 

[RelaxTheMind]

Just dont pay them off and the credit card company cancels your account for you. Change your identity and live on mars and they cant find you.

 

[amdhunter]

Originally posted by: Kelemvor
Cancel the cards assuming you have other cards that you use. But if you're worried about it, ask them to note the account that it is being closed per customer request.

No reason to have a card with an annual fee unless you get some major rewards for using it. And I've never heard of a cancellation fee for closing a credit card.

All I would have left (and all I use nowadays) is a Chase debit card with a VISA logo. I guess that won't count? I haven't used cash (in anything higher than 10 dollar bills) in almost a year now.