There are a lot of benefits to keeping your credit card accounts active. With responsible use, they can be a good way to build up your credit, which is necessary in order to qualify for larger loans (such as a mortgage). They can make it easier and more convenient to shop online, and they’re arguably safer than debit cards or cash for a lot of things. In fact, simply keeping your oldest credit card account open (regardless of whether you use it) can help to improve your credit score, whereas closing it might cause a drop. While there are some advantages to consider when it comes to keeping your credit cards, there are also some advantages to consider when it comes to closing them all out, too. Some of these benefits include:
No annual fees
Some credit card programs will impose annual fees to customers just for having the accounts open. This means that even if you aren’t using the card, you’ll still need to pay that annual fee just for having the account active. If you have a credit card with an annual fee and you aren’t really using it anyway, you might be better off without it.
If all of your credit cards have unfavorable terms (high interest rates, very low limits, annual fees, etc.) you may want to close them out if you qualify for a better offer. If you’re able to open up a credit card with much more favorable terms and lower interest, consider just using that credit card and ditching the rest. Sometimes, you might receive those better offers after you’ve canceled your credit card accounts. After a few months (for some credit card issuers, it might be a year) you may qualify for new customer promotions, assuming that your previous accounts were paid off and in good standing, and you’ve maintained a decent credit score since closing out your accounts.
Less temptation to overspend
Many people don’t think twice about making purchases they don’t really want or need because they’re just charging it on their credit cards, and charging it (at least at the time) can feel less “real” than paying with cash. If you’re forced to pay for something with cash or your debit card, you’re much more likely to think carefully about your purchases, especially expensive ones. Even if you’re good with paying your bills on time each month, it can be beneficial to get rid of your credit cards if they’re causing you to spend a lot more than you normally would.
No more accumulating credit card debt
For many consumers, this is one of the main reasons to get rid of their credit cards for good. If you find that you’re constantly charging on your credit cards, they’re maxed out all the time, and that you’re struggling with minimum payments, you may want to get rid of them. Put a plan into action that allows you to focus on paying off your credit card debt as quickly as possible, and closing out the accounts once they’re all paid off.