I currently have a credit limit of 2250 spread out across 5 cards accounts. In July, 1 of the cards(I'll call it Card A) with a $300 limit will be 100% paid off. Also in July, another card account(Card B) is due to open/activate(I staggered out the opening fee into 3 payments on May 2, June 2, and July 2). That card also has a $300 limit but with better terms and no "account maintenance fees" for the first year, after which it is $6.50 a month though I'll likely close it during the 12th month. I recently called the company for Card A to inquire about how low my balance has to be before I won't get charged their idiotic $12 account maintenance fee(when I opened it, I missed the fine print... but I'm aware of it now) every month. The card services rep told me that even if my balance is $0, I'd still be charged the $12 fee every month, but with no interest. I thought about it and decided that I am NOT okay with being charged $144 per year for a card that will likely have a $0 balance on it most of the time(because I would have paid it in full every month going forward).
Now I've heard that closing a credit card account can hurt a score because of the lowering of my available credit limit... and because it could shorten my credit history. BUT this card is not the oldest one on my account, and since Card B is activating in July and Card A with the $12 monthly fee will be paid off in July, should it really hurt my scores if a $300 limit/0 balance Card A disappears right as the $300 limit/0 balance Card B appears? By the time Company/Card A reports as closed, Company/Card B will likely have already reported as Open... so it's just replacing one, with the other, right? I figure with closing one account in July and another account activating in July, both of those will likely have posted by late August... and my total credit limit won't have changed. Am I missing something or could this work without hurting me in the long run?
Starting Score: 487
@Shellemilyrose wrote:I currently have a credit limit of 2250 spread out across 5 cards accounts. In July, 1 of the cards(I'll call it Card A) with a $300 limit will be 100% paid off. Also in July, another card account(Card B) is due to open/activate(I staggered out the opening fee into 3 payments on May 2, June 2, and July 2). That card also has a $300 limit but with better terms and no "account maintenance fees" for the first year, after which it is $6.50 a month though I'll likely close it during the 12th month. I recently called the company for Card A to inquire about how low my balance has to be before I won't get charged their idiotic $12 account maintenance fee(when I opened it, I missed the fine print... but I'm aware of it now) every month. The card services rep told me that even if my balance is $0, I'd still be charged the $12 fee every month, but with no interest. I thought about it and decided that I am NOT okay with being charged $144 per year for a card that will likely have a $0 balance on it most of the time(because I would have paid it in full every month going forward).
Ouch on those fees, I say close it especially if you don't need it.
Now I've heard that closing a credit card account can hurt a score because of the lowering of my available credit limit... and because it could shorten my credit history. BUT this card is not the oldest one on my account, and since Card B is activating in July and Card A with the $12 monthly fee will be paid off in July, should it really hurt my scores if a $300 limit/0 balance Card A disappears right as the $300 limit/0 balance Card B appears? By the time Company/Card A reports as closed, Company/Card B will likely have already reported as Open... so it's just replacing one, with the other, right? I figure with closing one account in July and another account activating in July, both of those will likely have posted by late August... and my total credit limit won't have changed. Am I missing something or could this work without hurting me in the long run?
Check out this thread: http://ficoforums.myfico.com/fico/board/message?board.id=creditcard&thread.id=117125&jump=true
That should give you some perspective about closing accounts. If you don't have an issue with utilization (honestly, as long as you PIF, I wouldn't worry about util unless you are actively seeking more credit), then there will be no immediate impact. Closed cards will report for up to 10 years and by the time they fall off, everything else on your report will be 10 years older anyway. I personally am all for closing cards you don't need (especially if it costs you money!) but it's your decision; you need to do what works best for you. And if saving money > possible later AAoA hit for you, then close it.
Good luck with whatever you decide!
Quicksilver $10,000 | Better Balance Rewards $2000 | Sallie Mae $3500 | Freedom $3500
@Callandra wrote:
@Shellemilyrose wrote:I currently have a credit limit of 2250 spread out across 5 cards accounts. In July, 1 of the cards(I'll call it Card A) with a $300 limit will be 100% paid off. Also in July, another card account(Card B) is due to open/activate(I staggered out the opening fee into 3 payments on May 2, June 2, and July 2). That card also has a $300 limit but with better terms and no "account maintenance fees" for the first year, after which it is $6.50 a month though I'll likely close it during the 12th month. I recently called the company for Card A to inquire about how low my balance has to be before I won't get charged their idiotic $12 account maintenance fee(when I opened it, I missed the fine print... but I'm aware of it now) every month. The card services rep told me that even if my balance is $0, I'd still be charged the $12 fee every month, but with no interest. I thought about it and decided that I am NOT okay with being charged $144 per year for a card that will likely have a $0 balance on it most of the time(because I would have paid it in full every month going forward).
Ouch on those fees, I say close it especially if you don't need it.
Now I've heard that closing a credit card account can hurt a score because of the lowering of my available credit limit... and because it could shorten my credit history. BUT this card is not the oldest one on my account, and since Card B is activating in July and Card A with the $12 monthly fee will be paid off in July, should it really hurt my scores if a $300 limit/0 balance Card A disappears right as the $300 limit/0 balance Card B appears? By the time Company/Card A reports as closed, Company/Card B will likely have already reported as Open... so it's just replacing one, with the other, right? I figure with closing one account in July and another account activating in July, both of those will likely have posted by late August... and my total credit limit won't have changed. Am I missing something or could this work without hurting me in the long run?
Check out this thread: http://ficoforums.myfico.com/fico/board/message?board.id=creditcard&thread.id=117125&jump=true
That should give you some perspective about closing accounts. If you don't have an issue with utilization (honestly, as long as you PIF, I wouldn't worry about util unless you are actively seeking more credit), then there will be no immediate impact. Closed cards will report for up to 10 years and by the time they fall off, everything else on your report will be 10 years older anyway. I personally am all for closing cards you don't need (especially if it costs you money!) but it's your decision; you need to do what works best for you. And if saving money > possible later AAoA hit for you, then close it.
Good luck with whatever you decide!
Thanks. To hear some folks talk about it, I thought that if I cancelled a card in good standing, that everything would vanish... it's great to know that it stays there for 10 years. I had some issues with utilization but I've gotten a better grip on it. Back in 2013, I wasn't paying close enough attention to the fine print and I obtained a matrix card via Continental Finance. It was my mistake for not reading close enough, but honestly, a $12 monthly account maintenance fee ON TOP of the 40% something interest? I know my credit history sucks, but wow... anyways, I will go ahead and close that one in July. If the maintenance fee would have gone away, then I might have kept it open but not if I'm going to still get charged $12 bucks a month for keeping that balance at $0. My total credit history is 11 years, the first 5 years of my credit history were great... then my income got yanked in 2008. I've been trying to rebuild ever since, but didn't really get the jump on it until 2011.and since 2011, I've never missed a payment. I have 5 years of a solid payment history, but I have some old collections that I'm dealing with little by little. Anyways, thanks for the insight!
