December 19,2008
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The Tough Questions, Pt. 1 –
-- Closing credit card accounts.More and more, our American public is being faced with situational questions that have no easy answers. Credit cards are hanging out there cause everybody's got one (or 15). In these last few years there has more and more pressure to run up credit card debt. Not for the sake of debt, most of us would choose to not carry any debt. But to feed and cloth the family and still buy gas to look for work (or even get to work, for those luck enough to have jobs), we've had to bend the rules a little bit with the credit cards. These are the most extreme times many of us have ever faced. Here are answers to three big questions that many of us are forced to deal with for the first time:
1) Does it hurt or help to close a credit card account?
Many people are asking this question but, perhaps, even more are not being asked. The industry is busily at work as we speak (as you read this) closing your credit card accounts for you without your knowing. You will be informed, after the fact, however. Before that happens, it's good to know what goes on.
First of all, it will hurt to close a credit card account with a balance on it. This signals the industry that you probably couldn't pay your debt (even if you can and do pay it on time). Reduce the balance to zero first.
Watch your debt ratio, however. Don't finding yourself owing more then 50% of the total credit available from all your remaining credit card accounts.
When choosing which credit card account to close, consider that longevity is important. So, if all other things are equal, choose to close the newest one first.
One way to avoid having the credit card lender close your accounts behind your back is to place a small charge on the card at least once every quarter (3 months). They go after inactive one's first.