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3 Personal Reasons to Close a Credit Card Account

3 Personal Reasons to Close a Credit Card Account

There are many things that may lead you to close a credit card account. This isn’t a decision to take lightly, as it can have a negative impact on your credit score, but it may be a move that you have to make.

Here are three personal reasons to close a credit card account:

•    You are done taking on debt. Many people reach a point in their life when they no longer want to take on debt, as this has gotten them in trouble in the past. For example, if you just got finished paying off high interest credit card debt, you may vow to avoid this situation in the future. The best way to protect yourself is to close your account altogether.
•    Divorce. This is an unfortunate situation, but it’s one that will call for you to close your joint credit card account. Once you decide on divorce, this is something you need to do. Remember, assets aren’t the only things divided as the result of divorce. Debt also comes into play. If you still need access to a credit card, you can always apply for one in your name (and your name only).
•    You want something better. Simply put, there may come a time when you realize that your credit card isn’t giving you everything you need. An example of this would be a card with a high annual fee but no rewards program. When you cancel your current account, you can then start fresh during your search for a better offer.

As noted above, these are just a few of the many personal reasons to close a credit card account. Once you understand the pros and cons of making this decision, you can decide if it makes good sense to move forward.

Have you canceled a credit card in the past? Why did you decide on this? Share your personal thoughts and advice in the comment section below.

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Comments 1

Wanderer on Saturday, 22 April 2017 20:32

In early 2016 I determined there were more credit card accounts for me to use than was required or practical. So, I determined what accounts best served my needs and to close the balance. In the end I closed six accounts (four bank card and two store accounts). The total credit limits reduced were $50,000. Now my FICO Scores took a temporary reduction which lasted a few months and then came back up. As has been brought out, there are some factors to be aware of: 1) You are reducing the "available credit" to be used in calculating your credit report utilization; and 2) you will see your accounts report "Closed by Consumer" as a positive report which means they usually will remain on your credit report for ten years. The danger, around ten years they may drop off and you may lose the positive effect of the closed accounts. Remember, credit reports put weight on "Oldest Account" and "Average Age of Accounts." You wonder is it worth the risk ... that is what you need to weigh. For me, my hope is that the depth of my credit file will be such that the impact will be minimal.

In early 2016 I determined there were more credit card accounts for me to use than was required or practical. So, I determined what accounts best served my needs and to close the balance. In the end I closed six accounts (four bank card and two store accounts). The total credit limits reduced were $50,000. Now my FICO Scores took a temporary reduction which lasted a few months and then came back up. As has been brought out, there are some factors to be aware of: 1) You are reducing the "available credit" to be used in calculating your credit report utilization; and 2) you will see your accounts report "Closed by Consumer" as a positive report which means they usually will remain on your credit report for ten years. The danger, around ten years they may drop off and you may lose the positive effect of the closed accounts. Remember, credit reports put weight on "Oldest Account" and "Average Age of Accounts." You wonder is it worth the risk ... that is what you need to weigh. For me, my hope is that the depth of my credit file will be such that the impact will be minimal.
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Tuesday, 19 November 2019

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