Closing Credit Card Accounts

Closing Credit Card Accounts

There is no question that closing credit card accounts lowers your credit scores by lowering your available credit or your credit utilization ratio.

If you have 8 credit cards with a $2,000 limit, your total available credit is $16,000. If half of those credit cards are maxed out, you are using 50% of your available credit.

Now you have decided to option out of four of those credit cards since they are going to increase your interest rate and they are the ones you have a zero balance with. Now you are using 100% of your credit. Being maxed out on your revolving credit cards lowers your credit scores significantly.

The second way that closing a credit card account hurts you is when the credit card company stops sending data (tradeline) to the credit bureaus and falls off your credit report. You will not see this right away but when it does, not having the tradeline on the report could drop your rating enough and dramatically lower your credit scores.

If you have an account with a long tradeline (open more than 8 years), you should do what ever you can to keep it open. Skip the calculation method and pay this one down first

Not to say this is the answer for everyone. If you are in survival mode and you are worried about doubling your monthly payment due to an increase in the interest rate, then you need to keep this in mind. No use keeping a credit card that is going from a $150 monthly payment to $350 a month if your budget is already tight.

The best credit cards you can put in your wallet right now are SECURED bank cards they are not going to change your interest rates like the big banks. Furthermore, they are not going to reduce your credit line. The next best cards are from a small community bank or a credit union.

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