Credit Cards Question

Dump. Too many can hurt the score, but canceling them yourself does not.

I'm w/rog on this. If any of your cards have annual fees, those would be the ones to dump first, followed by those having the higher interest rates and/or shorter grace periods, IMO.

cost to cancel
One important thing to remember if you are going to cancel your card make sure the balance is paid in full. If you cancel the card before paying it all off the interest rate will go way up.


Good Luck,

Greg

Edit (Moderator): Link Removed

Interesting and useful, lucas. Less related to the question; if you accept a bargain rate don't charge to the card till it's paid in full, and never, ever make a late payment.

Re: Credit Cards Question


The important issue is your amount of debt relative to your amount of credit.

The lower the debt and the higher the credit, the better you'll look when you're applying for credit.

Keep the cards, use them and for sure pay them on time.

Maybe, miller, but I've heard otherwise. That is, I've been told they not only look at amount of debt, but at the amount of unsecured debt you could have if you were to max out all cards.

Wrong! I am a Licensed Mortgage Broker. Closing the accounts can only hurt your credit, the lower your debt to available credit ratio is the better. My FICO is 825, I have 12 cards with over 100k in available credit and 3k in debt. I just opened three new accounts in the last 2 months, all offering 0% for 12 months. I am using those to finance my upcoing cosmetic surgery.

Dump the stinking card!. Keep one for doing what you must.

Come on! Just think about how ridiculous the question is (and I am insulting the credit industry, not you). They want you to believe that if you cancel your card (refusing their "wonderful" services) you will somehow be penalized by damaging the "score" they use to rate you?

Credit card companies are evil, and the addiction of Americans to credit is obscene.

The "credit score" is a cynical myth and you will not lower your quality of life one bit by not buying in to it-- in fact by simply not using credit period-- except perhaps to buy a house, most Americans would be much much richer.

Worrying about your score is foolish. It is the credit industry who needs you, not you who need them, and the score is a brilliant, yet cynical, marketing gimmick more than anything else. That the industry is going after college kids with a vengence proves this.

They will come after you with "low" rates whether you have one or ten cards.

If you are worried about buying a house or getting a school loan (or some other of the few good uses to get credit) there are resources for people who haven't bought into the credit scam.

If there are any extra costs you need to pay because you don't have 20 credit cards and $100,000,000 of available credit, they will be much less than the ridiculous rates that the vast majority of Americans get tricked into paying.

I don't think that for a consciencious consumer who doesn't play the game there are even any costs.




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What I have heard is it is debt to available debt ratio. If you don't have a lot of credit on the other cards then you have not problem.

Look at it this way. You have 3K in credit card debt and 10K available. You cancel all the cards so now you have 3K in debt and your cards are maxed out. It looks like you are barely getting by.

The reverse is too much available credit means you can suddenly run up more than you can possibly pay. A person might keep getting credit cards to get 10x their salary then max them all out and declare bankruptcy.

Reasonable credit for what you make and a reasonable debt versus available debt is probably the happy medium.

You consider $3,000 dollars in credit card debt reasonable?

Credit card debt almost always means you are making unplanned purchases that you can't afford.

The cost is interest rates, which for credit cards are not only higher than planned purchases, they also contain agreements that the credit card companies can change and fees that they can use to increase their profits at your expense. The game is heavily tilted in the credit cards companies favor.

To me reasonable debt means you have thought about the expense, and negotiated a good interest rate. With a little smarts and self-control you can lower interest rates by saving money for a down payment.

Reasonable debts include college loans or buying a house. Both of these are things you plan for and are investments-- they pay off in the long run.

Think of how much money you waste by carrying a $3,000 debt even at the best rate, without getting snookered with fees (and the vast majority of us get snookered with fees) you are talking hundreds of dollars a year in interest rates.

By simply living within your means, you will save much more money than your credit score will. Start by simply not carrying credit card debt.

1. Get rid of the extra cards you don't use.
a. Keep the no fee, low interest card.
b. Make copies of the front and back, and keep in a safe place.
c. If the card is lost or stolen, report the loss immediately.
2. Pay off first any you will cancel.
3. Always pay in full, and never pay late.
4. Consider "reward" cards if it meets the no fee low interest criteria.
5. Consider online automatic payments.
6. Don't spend more than you can afford.
7. Bankruptcy laws have been changed; learn about them.
8. Don't give out your card number and three number code over the telephone to anybody.
9. Enjoy the fruits of your labor, but save for your retirement.

I carry just about a $3,000 debt right now (few months without salary - I almost made it, but money that was owed to me for a booklet I wrote by publisher did not come on time, in fact they still didn't pay and it is costing me hundreds of dollars on various fees and interest on my two credit cards, grrrrrrrr) - but only for a month so far. I plan to be rid of it in the next two months, even if I have to survive on dog food. Then I will close one of the two credit cards I have. I don't want more than one, I feel exactly the way ebrown does about those blood suckers.

My two credit cards are actually more a kind of debit card - are paid monthly without paying interest.

Then, I've got - which is much more common here in Germany - debit cards for my bank accounts.

These cards give me an instant credit of 20,000 € (plus what's on the bank accounts :wink: ).

I've done a lot of debt counselling (during my time at the probation office) - I'm glad, credit cards are not so common here.

I used $3k because I seem to remember the average credit card debt was about that.

If you have $3K at 1% interest, why would you pay more than the minimum?

Boy was I wrong on $3K being average. Yahoo says the average American credit card debt is $8,562

I like CIs advice, but do you know what the industry jargon is for people who do this? You would think is would be "responsible", or "reliable"--- but it is not.

Credit Card insiders call a person who pays off their balance every month a "deadbeat" (since they aren't able to suck any money out of them).

Credit card companies scheme to try to get them to take on some debt. Raising your credit to obscene levels and offering low teaser rates (that go up after you get some debt) are part of this.

People who take on debt during hard time (i.e. times of unemployment) are vulnerable to the blood sucking. The majority of credit card contract stipulate that they can at their discretion raise interest rates (often for changes in life situation, like getting more debt). The credit card companies know they can suck more money out of people when they are vulnerable.

(Fortunately there is room for negotiation when this happens. The credit card companies don't want to have to take people to court (or have them go bankrupt) both of which cost them money. So if your credit card company pulls this, you can simply stop paying until they fix the problem to your satisfaction. They will threaten you credit score, but the damage they can do to you life is exagerrated, especially when you are already having financial difficulties and since fighting with you will hurt them more than it hurts you, most customers who hold firm win.)

parados, you are correct that $3,000 at 1% interest is a very good deal. I am a bit dubious that a credit card company would give you this (as their life's mission is to suck as much money out of you as possible). Certainly this is nowhere near the average interest rate for the over $8000 the average American family owes. Rates of 18 or 19 percent are not uncommon.

Many times credit card offer a temporary low interest rate to pull you in, knowing that they can raise their rates when any "customer" starts to take on significant debt.

Then again, many times a drug pusher will offer free heroin. I don't think it is in your best interest to take either of these offers.

On the other hand, I don't carry cash or pay by check for anything I can pay by credit card. I too have approx $100,000 of available credit and typically charge about $3,000/month. But then I zero balance my cards at the end of each month, never paying interest fees, late fees, or annual fees. This allows me to get up to 30 days free use of my money.

Having and using credit cards for all purchases (major and minor) is an easy way to keep track of expenses and doesn't necessarily mean that one is not living within their means. Zero balancing the accounts each month takes willpower and commitment but managing our accounts this way over the years has given us an impeccable credit history.

I only carry two personal cards and one business card. One of the personal cards is a high limit card and is the one I use for most purchases. The other card is a low limit card and is only used for internet or over-the-phone purchases. Very little damage can be done that way if my number is somehow captured and used by someone else.

To the original question, whether you have one or two cards with large credit limits, or six cards with smaller limits isn't important. If you are carrying multiple cards because you needed the extra credit then negotiate a higher limit (and lower rate) with one or two of the companies you want to continue to deal with and cancel the rest. Your credit rating is based on your payment history as much as it is on your available credit.

If you are paying finance charges, then I would strongly recommend reducing your overall debt to the point where you can zero balance your credit cards at the end of each month.

Generally, 'real money' is still used in most cases in daily life. Instead of credit cards here nearly everyone uses a debit card instead of a credit card. (Credit cards just start to become more accepted than in a few places.)

I'm glad you brought that up, Walter. I was about to post this question on the Europe board but I'll ask here instead.

Mr B and daughter K are about to visit Vienna, Budapest, and Prague. As I mentioned above, we are not used to carrying cash and rely on our credit cards for just about everything. Would you recommend they carry cash/traveler's checks rather than depend on being able to use credit cards?

Travellor cheques are rarely used and mostly have to get exahcnaged at banks.

Of course you can do all major shoppings as well as pay most bills (e.g. in rstaurants, hotels) with any of the various credit cards (there's usually a sign at the entrance which are accepted).

However, cafés, small (sovenir) shops, busses, taxis etc generally only accept debit cards ("Maestro") or cash.

That's more Vienna than Budapest/Prague related, because I just know Austria. :wink:

At least some cash is not only useful but necessary.