topic Re: Cancel unused cards? in Personal Finance

Cancel unused cards?

Clancaster23 — Sun, 05 Jan 2025 16:33:25 GMT

If some reading this may have read my other post about figuring out what to do about a potential bankruptcy or at the very least going through a debt relief program to make it easier to pay bills month to month, I am looking to save every dollar I can to avoid all that. Right now my score according to Experian is 720.

Right now I have 11 cards active. All in good standing. Six of these I have zero balance on. Those being a Capital One, Fortiva, two Credit One, Milestone and a Citi. The Capital One and Citi charge no annual fees so I want to keep those. The two Credit One cards, one charges me $8.25 a month for the annual fee and the other which I have never used is about to charge me $95 in the middle of this month according to the statement. The Fortiva charges me $15 a month. The Milestone recently upped their fee to $19.25.

Despite being current on them all, I don't need them and obivously have no plans to use them and I keep giving them money to have it. I figure roughly $50 a month I'd save not having them. I know it will take a hit on my score but I'm not really concerned about that at the moment considering it would help my financial situation a little bit and the score will recover over time. I've had them all for several years so with that credit history I'd also be losing a total of around $4,000 in "available credit" but again, not really concerned with it at the moment. Should I cancel these cards and take the score hit? I'm thinking the answer is yes, just need someone to tell me so.

Re: Cancel unused cards?

Casper476 — Sun, 05 Jan 2025 16:41:22 GMT

When you close an account, it stays on your credit report for 10 years if it's in good standing at time of closure. So it's always a good idea to close out any annual fee credit cards where you can't justify the annual fee.

Re: Cancel unused cards?

Rogue46 — Sun, 05 Jan 2025 17:54:54 GMT

I would cancel the subprime cards they really aren't helping you. If you don't carry a balance you won't take a utilization hit but depending on the aging of those cards you might see a decrease in score but like @Casper476 mentioned they will stay on your reports for up to 10 years

Re: Cancel unused cards?

salt_water_swimming — Sun, 05 Jan 2025 19:11:15 GMT

Absolutely close the monthly fee cards. Those are only for people who can't get a card anywhere else and need to build credit.

The only potential downside would be a hit on utilization. Since these cards have 0 balance, your total limit will fall while your reported total balances won't. You should run the math on your new utilization to prepare yourself for the credit hit that might cause. But it's definitely still going to be better than paying $50 /month for cards you don't use, and way better than defaulting/bankruptcy.

You should also look at one or more new cards with 0% introductory APRs while your scores are still good. This would allow you to float some expenses while you sort out your finances. They will often have lower monthly payments than cards actively charging interest. You can often balance transfer directly to your bank account for cash only expenses too.

Re: Cancel unused cards?

Pppoolboy — Mon, 06 Jan 2025 06:21:02 GMT

As a bankruptcy attorney of 17 years I can tell you that it's almost assured that, if you file for BK, all your cards will be shut down anyway so trying to save any of them is pointless. I don't know your situation but at this point all you should be worrying about -- if you want to avoid BK -- is to curtail your spending as much as possible. This probably means you'll want to stop paying any outstanding CC balances, like, right now. If those balances are high enough you will be sued in a couple of years. However, once sued you can negotiate a pay-for-delete if you haven't filed for BK already.

Obviously there are a WHOLE lot of caveats to this, so if you're even thinking about BK you probably want to talk with your friendly neighborhood bankruptcy attorney WELL IN ADVANCE so he can give you some (free) advice moving forward.

About 50% of the folks who call me never end up filing for BK but I'm happy to give them a (free) 15-20 minute chat to let them know what their options are and what I recommend. Keep in mind that attorneys have a fiduciary duty to you and cannot recommend you use their services if you don't actually need those services. I'm totally cool with telling people that they don't need my services and that they should instead do X Y and Z.

Oh, also... debt relief programs rarely work. Probably a third of my clients have wasted money with debt consolidation before they end up BKing. Debt consolidators skim off too much money to make an impact on your debts and you end up doing nothing more than enriching the debt consolidators. Just saying...

Re: Cancel unused cards?

IcyCool7227 — Mon, 06 Jan 2025 09:15:40 GMT

I agree with the others. Cancel those fee sucking cards! An annual fee card is only good if there are prime benefits (like travel credits, extra cashback and the like) that give you lots of value if you spend enough rather than just being a card for people with bad credit which you don't have. You're wasting your money on nothing substantially beneficial. I would have closed them off a long time ago. Keep the ones you want to keep like Capital One. C1 can give extra cashback through their offer portal so that's why I'm keeping mine.

Re: Cancel unused cards?

TrapLine — Mon, 06 Jan 2025 09:33:58 GMT

In cancelling cards, pay attention to age and loss of credit limits.

Speaking with experience, I have been closing cards and some of the old ones dropped off the credit bureau in one to two years (usually more towards ten years) and it hit my scores hard. Also, the loss of credit limits could affect DTI.

FNBO has dropped from the credit bureaus in as little as two years and Capital One around eight. Varies but a "heads up" on caution.

Re: Cancel unused cards?

Varsity_Lu — Mon, 06 Jan 2025 12:40:58 GMT

@Casper476 wrote:
When you close an account, it stays on your credit report for 10 years if it's in good standing at time of closure. So it's always a good idea to close out any annual fee credit cards where you can't justify the annual fee.

This. I still have some Synch accounts reporting that have been closed since 2015 and 2017. They were opened in 2003 and 2014 and it's the opening dates that are helping my score. The 2003 account is reporting as 21+ years for me. Closing it won't necessarily drop your score. If you can save 50 bucks a month on fees, do it. Especially if you aren't using the cards.

Re: Cancel unused cards?

BudC2 — Mon, 06 Jan 2025 12:57:04 GMT

Listen to the BK attorney above! Also close all AF cards and worry about keeping your oldest no AF card to help preserve age of accounts. At this point credit score is the least of your concerns. Remember that BK stays on your report for 10 years. It hurts badly for the first couple and then slowly diminishes however if you have reaffirmed accounts like mortgage or Equity Line of Credit that can affect you even after that 10 years. I can't get a CLI from Citi because of the reaffirmed account situation. Even though the BK may be removed from your credit report there are other ways lenders can hold old issues against you. Citi is the first and only one so far that has done this to me but creditors are not as stupid as we want them to be sometimes.

Re: Cancel unused cards?

Anonymous — Mon, 06 Jan 2025 16:35:52 GMT

I may be off base here, but if you're thinking of going into a debt reduction or a bankruptcy situation do you really care what your score is? Seems to me if you do either of those programs you're score is going to suffer anyway. I'd agree with all the others to get rid of the cards that you're paying for, and maybe take a look at what the APR's are for the ones that remain to see which would generate the least burden. In any case, good luck.

Re: Cancel unused cards?

Clancaster23 — Mon, 06 Jan 2025 21:59:15 GMT

To start off, this is another post I started where I asked what I should do in my current situation. Debt Relief Program My Only Option? - myFICO® Forums - 6795679

I don't want to do the bankruptcy or the debt relief program but not sure what else to do if it comes down to it. I want to do whatever I can to avoid doing either of those.

Are you saying I should stop making all payments on all my cards? What about my loans?

I'll relist what I have going on here to make it clearer. And just to put it out there, all my cards are very high interest (25%-35%) mainly because I had bad credit in the past (sub 500) and got most of these cards while I was trying to build my credit up.

Cards:

Milestone - No balance, $700 limit (19.25/month fee)

Credit One - No balance, $300 limit (8.25/month fee)

Credit One - No balance , $1,000 limit ($95 AF)

Fortiva - No balance, $1,850 limit ($15/month fee)

(Those are the four I want to cancel now)

Capital One - No balance, $1,000 limit (no af)

Citi - No balance, $1,850 limit (no af)

Upgrade - $1,800 balance, $2,750 limit, $118 payment
Chase - $1,050 balance, $3,500 limit, Not sure of payment yet

Brightway - $1,560 balance, $2,450 limit, $50 payment

Mercury - $3,020 balance, $7,800 limit, $120 payment

Merrick - $1,940 balance, $2,700 limit, $108 payment

$9,370 balance, $475 est. in payments/month

Loans: (all relatively new loans taken in the last year or so, smaller amounts were taken out to pay off other cards and things to save more per month)

1: $4,400 remaining, $145 payment

2: $1,725 remaining, $41 payment

3: $6,700 remaining, $168 payment

4: $8,725 remaining, $178 payment

5: $21,500 remaining, $718 payment (Joint loan with wife but I make the payment so I need to pay this one so as not to effect her credit)

$43,050 total, $1,250 in payments/month

Basically $52,000 total and $1,725 in payments each month. Also to note, the four cards I will be canceling are 5 years, 11 months (my second oldest card), 5 years, 6 months, 3 years, 9 months and 1 year.

Re: Cancel unused cards?

Varsity_Lu — Mon, 06 Jan 2025 21:07:37 GMT

@Clancaster23 wrote:
To start off, this is another post I started where I asked what I should do in my current situation. Debt Relief Program My Only Option? - myFICO® Forums - 6795679

I don't want to do the bankruptcy or the debt relief program but not sure what else to do if it comes down to it. I want to do whatever I can to avoid doing either of those.

Are you saying I should stop making all payments on all my cards? What about my loans?

I'll relist what I have going on here to make it clearer. And just to put it out there, all my cards are very high interest (25%-35%) mainly because I had bad credit in the past (sub 500) and got most of these cards while I was trying to build my credit up.

Cards:
Milestone - No balance, $700 limit (19.25/month fee)
Credit One - No balance, $300 limit (8.25/month fee)
Credit One - No balance , $1,000 limit ($95 AF)
Fortiva - No balance, $1,850 limit ($15/month fee)
(Those are the four I want to cancel now)
Capital One - No balance, $1,000 limit (no af)
Citi - No balance, $1,850 limit (no af)
Upgrade - $1,800 balance, $2,750 limit, $118 payment
Chase - $1,050 balance, $3,500 limit, Not sure of payment yet
Brightway - $1,560 balance, $2,450 limit, $50 payment
Mercury - $3,020 balance, $7,800 limit, $120 payment
Merrick - $1,940 balance, $2,700 limit, $108 payment
$9,370 balance, $475 est. in payments/month

Loans: (all relatively new loans taken in the last year or so, smaller amounts were taken out to pay off other cards and things to save more per month)
1: $4,400 remaining, $145 payment
2: $1,725 remaining, $41 payment
3: $6,700 remaining, $168 payment
4: $8,725 remaining, $178 payment
5: $21,500 remaining, $718 payment (Joint loan with wife but I make the payment so I need to pay this one so as not to effect her credit)
$43,050 total, $1,250 in payments/month

Basically $52,000 total and $1,725 in payments each month.

If you are serious about not filing, you need to cut your cards up, cancel the AF cards, buckle down and get it done. Eat PB and jelly every meal if you have to. Sell anything of value that you don't absolutely need. Put every penny into paying off the loans and cards. Most importantly: stop spending money you don't have. It takes discipline, but you can do it.

Re: Cancel unused cards?

Rogue46 — Mon, 06 Jan 2025 22:58:37 GMT

I'd have to agree 100% with @Varsity_Lu . You took out most of those cards to build your credit but spent on them which defeated the purpose you need to break the cycle or it's never going to get better. We are rooting for you! Make a plan buckle down and stick with it!

Re: Cancel unused cards?

Clancaster23 — Tue, 07 Jan 2025 16:47:59 GMT

I agree with all of what is said. I tend to be a slow learner when it comes to money.

The four cards mentioned have been closed.

@Pppoolboy I'd like for you to clarify what you mentioned in your post about stopping payment on the cards I still have. Is that what you were suggesting as a better route than doing the bankruptcy?

Re: Cancel unused cards?

Clancaster23 — Mon, 13 Jan 2025 00:54:50 GMT

I just happened to look on Credit Karma to see what my scores were on there and they had one of their gauranteed approval things on a personal loan offer. I decided "why not"? Applied and got approved for 30k. Took 25k. This should set me up pretty good.

Re: Cancel unused cards?

Anonymous — Mon, 13 Jan 2025 02:27:41 GMT

@Clancaster23 wrote:
I just happened to look on Credit Karma to see what my scores were on there and they had one of their gauranteed approval things on a personal loan offer. I decided "why not"? Applied and got approved for 30k. Took 25k. This should set me up pretty good.

So what are you going to do with the $25K?

Re: Cancel unused cards?

Clancaster23 — Mon, 13 Jan 2025 02:32:55 GMT

It's enough to pay off the six cards I have a balance on off and all four loans. I figure I'm going to save roughly $500/month in payments.

Re: Cancel unused cards?

12njoy — Sat, 18 Jan 2025 02:21:16 GMT

Do you have any employment retirement accounts that you can borrow against? These may have lower APR's than traditional debt consolidation loans. A few years back (2021) I took out a loan against my retirement to take care of some outstanding debt and the APR was 1.5% with generous terms. Now obviously if this is an option, you want to pay that back as soon as possible so that the retirement fund is replenished and you continue to earn interest. The 25k loan that you were approved for what was the APR/terms on that? These loans can have steep repayments. Resist BK and debt relief programs at all costs. Good luck to you.

Re: Cancel unused cards?

Clancaster23 — Sat, 18 Jan 2025 02:51:41 GMT

Yeah, I actually did do that. I forget how much I was able to get but it did help q little bit. Currently still paying it back each paycheck. As far as the new loan, I believe it's 16.25% or something around that for 5 years. That's actually the lowest percentage rate I've ever gotten on a personal loan. The ones I've had were usually mid 20s to 30s so this one was very appealing to me and it is definitely going to keep me from having to do anything like the debt program or bankruptcy so I'm very happy I was able to get it. Big relief.

Re: Cancel unused cards?

IcyCool7227 — Sat, 18 Jan 2025 04:18:40 GMT

I have never taken out a personal loan but for the credit card balances you have, try going for a 0% introductory like the Citi Simplicity or Citi Diamond Preferred if you don't have a ton of recent inquiries. A good discussion thread with other ones are found here:

https://ficoforums.myfico.com/t5/Credit-Cards/0-interest-Balance-Transfer-cards-with-no-balance-transfer-fees/td-p/6723819

Of course you already took out the $25k loan but you could pay part of that back and go the balance transfer route to save more money.