To Close or Not to Close — That is the Question!

As I compile a list of my credit cards and accounts, I am happy to note that one card from Household Bank has a balance of zero. Conventional wisdom tells us to cut up the card, don’t take replacements, but keep the account open to keep your credit score high. However, I’ve decided to take the advice here at 360 Degrees of Financial Literacy and called this morning to close that account. This is a psychological decision to remove temptation and begin to whittle the number of open accounts down.

And yeah, it felt good!

Here is the advice from 360:

  • If credit is easily available, you may be tempted to use it. Any impulsive purchases could quickly mount up and result in serious debt problems. (Me: heh, yeah, that’s already what has happened. Out, out damn temptation!)
  • Open accounts may be used fraudulently if your account numbers are stolen or your cards are lost.
  • You may have to pay annual fees for the cards even if you don’t use them.  (Apparently I had paid an annual fee last October. This is one of the things the account manager, desperately trying to keep me as a customer, pointed out.)
  • Whether used or not, open accounts may create trouble when you apply for other credit such as mortgages or loans. Lenders commonly review your credit history and may see you as a credit risk if you have multiple open accounts with a large amount of available credit. Potentially, you could still use them and build up unacceptable levels of debt.  (Not really an issue — I’m halfway through a current car loan from my credit union and I bought my house a year ago.)

The account manager to whom I was transferred offered me upgrades to my card, which I assume would include lower interest rates, a premium account, appealed to my length as a customer (this account was opened in 1999) and did her best to convince me to stay. I simpled repeated, in a friendly tone, “no thanks, I would just like to close the account” and it was accomplished in about 2 minutes.

Another piece of advice — get a confirmation letter. I asked for one and it should be on its way.

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