Planning to close your credit card accounts to limit debt? While it is possible to improve your score through card closure in some cases, how do you determine when to keep an account open or closed? Here is a brief guideline to help you decide:
A vast majority of people close their credit card accounts due to extremely high interest rates. Even if you decide to close end your contract, remember that you would still have to deal with an unpaid card balance.
Is your credit card spending out of control? Do you feel that you are spending way too much money? This is a definite sign that you should close your account. Minimize the danger to your financial health by managing your finances responsibly.
If you are not getting adequate rewards for using a credit card, there is no reason to continue using its services. Several credit card companies offer reward points that allow individuals to earn travel miles and other benefits. Let go of your current card if it is difficult to redeem reward points.
Too Many Cards
Simplify your finances by limiting the number of cards you own. Too many credit cards results in excessive expenditure and eventually, increasing debt payments. Keep track of your payments and improve your credit score by closing some accounts.
It is better to close the credit card account that has the highest annual fees –provided you have made full monthly payments. In case you carry a balance, close the account with the highest interest rates and shortest grace periods. Keep in mind to read the closing company’s billing practice disclosures.
Identify theft is a serious crime. Credit card fraud and identity theft are common worldwide, especially in the United States. With a decline in the number of credit cards you carry, you can minimize the risk of credit card theft and identify theft.
Foreign Transaction Fee
In addition to credit card interest rates and annual fees, be cognizant of other fees. For instance, some companies charge a foreign transaction fee on those cards used outside the United States. Typically, this fee is not more than 3%, but it adds to the overall cost of your credit card. Switch to a credit card that does not charge a foreign transaction fee.
In a nutshell, the decision to continue or discontinue using credit card services varies from situation to situation. Before closing your account, make sure to analyze your existing financial needs and conditions.
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