topic Re: Why Close Credit Cards? in Credit Cards

Why Close Credit Cards?

vwgrrc — Thu, 19 May 2016 02:57:56 GMT

Hey all,

I always wonder this-

I see a lot of people here talking about closing CC. I think I understand the effect of closing accounts. But I don't see any advantage of closing them, when there's no AF. Some say for "ease of card management". But I would just set my unused cards aside and let them close me due to inactive, if applicable.

So why would people cloase cc? What is the cost of having unused cards? Just make sure I didn't miss anything

Re: Why Close Credit Cards?

creditgambler2018 — Thu, 19 May 2016 03:02:39 GMT

i closed the chevron card because they would not budge from a stinky 300 dollar limit even after 18 months of being opened and never late, plus i also have the discount card tht lets me purchase fuel at chevron and mobil.

pay it and close it if it has a crazy apr like more than 29 percent.

pay it and close it if you want to get out of debt and cannot manage finances.

pay it close it if you got screwed by company somehow.

close it if you dont plan on using it.

Re: Why Close Credit Cards?

sr383 — Thu, 19 May 2016 03:10:25 GMT

Another concern is that forgotten card accounts could be used for fraud. The card holder (who never pays attention to that old account) might not discover the fraud until the damage has been done.

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 03:12:53 GMT

Even if you don't use the card, you have to keep check on it to ensure fraud hasn't taken place. Some folks just don't want the hassle or liability, so they close them. Personally, I don't see the point of keeping a bunch of cards that I'm not gonna use.

Re: Why Close Credit Cards?

Kevin86475391 — Thu, 19 May 2016 03:42:13 GMT

Yeah, for me it's definitely to prevent fraud. I've heard lots of horror stories where someone sock drawers a physical card and forgets about it completely, but then the credit card company sends out a replacement card and the person's moved (and of course not notified their long-forgotten creditor) and someone else intercepts and somehow manages to activate and use it, all while going undetected by the real cardholder because they aren't monitoring their accounts. Or of course a fraudster could get ahold of the numbers or clone the card in the numerous sophisticated ways they use, and once again the card holder is none the wiser because they just aren't checking that account. I've also heard of stuff happening like an annual fee being assessed to a card the person isn't using anymore (I know your question was regarding no-AF cards, just pointing out another possible scenario), and once again it goes unpaid because the card holder has checked out of managing the account.

Credit card companies may try to notify the card holder of potential fraud but be unable to reach them due to out of date contact info. Generally there are very good fraud protections in place with credit cards, but they rely on the card holder to catch the fraud within a reasonable amount of time. If it's 8 months later and you're just noticing it's probably too late to salvage your credit score and you may legally be on the hook for all the charges and fees that have accumulated.

Bottom line: it's just risky to leave an unmonitored account open and doubly so if mailing address and other contact info might also change without being updated.

And of course along different lines, it's also quite possible that the person wants to actively close the account because they're ticked off with the card company or wants to make a 'point'. Really the credit card company is highly unlikely to care or even really notice if someone flies into a rage and closes their account, but it can feel good and vindicating for the person. LOL, think of it like deleting or blocking someone's number from your phone versus just not calling/texting them and ignoring them if they call/text. It can be like you're 'breaking up' with the credit card company and you want them to know damnit, and you want closure!

Re: Why Close Credit Cards?

vwgrrc — Thu, 19 May 2016 03:48:56 GMT

Thanks for everyone's input. Fraud is a good point.

That make me thinking about closing some unused CC that I will hardly check online again, like my BBVA Compass. But I will keep others like certain AMEX and Chase co-brands cards since I have severl CC from these lenders and I know I need to monitor the online account anyway!

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 04:06:13 GMT

There are a multitude of reasons why someone would choose to close their account. The most common is for security reasons and to prevent fraud. An unused account for an extended period of time poses a risk for fraud that can damage your credit history. Unused accounts typically aren't monitored and as such become a liability. Some lenders, like Cap 1, permit you to freeze your account which some customers (including myself) choose to do so you can safely sock drawer the card.

Another common reason is to voice/vote your displeasure with the bank and creditor. Credit card companies don't track usage as much as they track "churn". The value of a bank's credit offerings is rated by the number of accounts and assets it has. As such, they're very sensitive to "churn" and look very closely at the reasons why customers leave. Simply choosing not to use the card is ineffective as the bank is unaware of your displeasure.

Most banks when determining appropriate risk look at your overall credit exposure. An unused account could potentially impact your ability to get a higher CL with another lender when you apply. Some people will prune their unused cards so they appear less risky when applying for a new card they want.

The reasons are various but really it's very much a personal decision.

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 04:07:25 GMT

Another reason is exposure. People are CLI horny on dumb cards like the Barclay sallie mae card. Most people are category shoppers so you really don't need more than twice the amount you spend on a category for your CC limit. Example with the SM card is the category spend per month (if fully maxed out) is $1,250. Do you need $8k on that? No. Most people aren't using it for everything. Amazon is another. Who spends $5k a month on Amazon? Why see if you can get it to $10k? It's a waste of available credit to you. If you're over exposed to a lot of lenders then when you app for a card you want you can be denied simply by having too much credit (the denial reason will be similar to "excessive unsecured obligations in relation to income")

Keep it reasonable overall. If you have 3-4 cards you know you'll NEVER use again and the limits are like $20-$30k between them then free up that credit for something useful. If you have them as "padding" then you need to re-evaluate your spending and get it in check with your income.

Re: Why Close Credit Cards?

creditguy — Thu, 19 May 2016 04:38:34 GMT

For me it's simplicity. My motto is quality over quantity. I sliced off the fat of dead weight cards I gathered during the rebuild days. If I don't use them regularly then I cannot justify keeping them, regardless of whether they provide a little extra utilization padding or not. I like getting cards that fit different needs and cover different spend categories and that i will use frequently, For example you have a nice lineup that covers a lot without being a hassle to keep track of everything. I like to keep it simple or perhaps I'm just lazy

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 05:16:35 GMT

Meh it's not lazy. I always say I am going to close some cards but I haven't gotten around to making the calls just yet

Re: Why Close Credit Cards?

wasCB14 — Thu, 19 May 2016 05:23:16 GMT

I closed a card for the first time a few weeks ago, and for the best of reasons: I'd already milked it dry for the bonus and extras and didn't want to pay another AF.

When I read threads in which the OP relates how he or she:

1. Got angry about something (often trivial in my opinion) and closed a low-earning cash back card in rage, or

2. Just decided it didn't have a place in the lineup anymore

...I wonder if they realize they might have had a bonus worth several hundred dollars on an AF card, closed it strategically, and ended up with the same AAoA.

As far as the whole "monitoring for fraud" business...that's what email/text activity alerts are for: card-not-present and large transaction alerts for everything, and non-zero balance alerts on cards you rarely use. I was a victim of the IHG MC hack a few months ago, got the card-not-present email, called Chase, and had a new account number within an hour of the fraud.

If your card's issuer doesn't offer them, try to switch to a lender that isn't stuck in the 20th century. The rewards will probably be an improvement.

Re: Why Close Credit Cards?

Sharingan — Thu, 19 May 2016 13:06:08 GMT

@vwgrrc wrote:
Hey all,

I always wonder this-

I see a lot of people here talking about closing CC. I think I understand the effect of closing accounts. But I don't see any advantage of closing them, when there's no AF. Some say for "ease of card management". But I would just set my unused cards aside and let them close me due to inactive, if applicable.

So why would people cloase cc? What is the cost of having unused cards? Just make sure I didn't miss anything

Some individuals may have to close cards during the mortgage application process as well to limit potential liabilities/overextension. I'm sure securing that mortgage is much more important than hanging onto cards that he or she no longer has an interest in using.

For me, I close cards that no longer offer me value. I have so many accounts reporting on my CR that I don't need to hang onto zombie cards for history. It's a burden to monitor and maintain accounts that are no longer being used. A good example is my Citi Forward card. It was incredibly useful for the 3-4 years that I had it; but with the upcoming changes, it no longer offers me anything that I can't get elsewhere, so it has to go. Also, the points on fraud are definitely accurate as well.

Finally, there's a part of me that really detests the idea of tying up other people's (the banks') money when I don't need it.

Re: Why Close Credit Cards?

Mattopotamus — Thu, 19 May 2016 11:08:44 GMT

Unless the card has an annual fee, leave it open. It helps with your overall utilization and AAoA. Most of us either have a credit monitoring service or keep up with our cards so fraud is just as likely whether you have 1 or 10 cards.

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 11:45:15 GMT

I closed several cards when I combined limits. For example, I closed Venture when I folded the credit limit into my Quicksilver.

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 12:52:48 GMT

@Kevin86475391 wrote:
Yeah, for me it's definitely to prevent fraud. I've heard lots of horror stories where someone sock drawers a physical card and forgets about it completely, but then the credit card company sends out a replacement card and the person's moved (and of course not notified their long-forgotten creditor) and someone else intercepts and somehow manages to activate and use it, all while going undetected by the real cardholder because they aren't monitoring their accounts. Or of course a fraudster could get ahold of the numbers or clone the card in the numerous sophisticated ways they use, and once again the card holder is none the wiser because they just aren't checking that account. I've also heard of stuff happening like an annual fee being assessed to a card the person isn't using anymore (I know your question was regarding no-AF cards, just pointing out another possible scenario), and once again it goes unpaid because the card holder has checked out of managing the account.

Credit card companies may try to notify the card holder of potential fraud but be unable to reach them due to out of date contact info. Generally there are very good fraud protections in place with credit cards, but they rely on the card holder to catch the fraud within a reasonable amount of time. If it's 8 months later and you're just noticing it's probably too late to salvage your credit score and you may legally be on the hook for all the charges and fees that have accumulated.

Bottom line: it's just risky to leave an unmonitored account open and doubly so if mailing address and other contact info might also change without being updated.

And of course along different lines, it's also quite possible that the person wants to actively close the account because they're ticked off with the card company or wants to make a 'point'. Really the credit card company is highly unlikely to care or even really notice if someone flies into a rage and closes their account, but it can feel good and vindicating for the person. LOL, think of it like deleting or blocking someone's number from your phone versus just not calling/texting them and ignoring them if they call/text. It can be like you're 'breaking up' with the credit card company and you want them to know damnit, and you want closure!

Great answer.

Re: Why Close Credit Cards?

takeshi74 — Thu, 19 May 2016 13:47:37 GMT

@vwgrrc wrote:
Why Close Credit Cards?

Up to each to determine such things. This is a subjective matter. Situations, needs/wants, goals, preferences. priorities are not all identical for everyone. This is also a very common topic. Don't overlook prior threads as a resource.

@vwgrrc wrote:
But I don't see any advantage of closing them, when there's no AF.

Never assume "I don't see" and "does not exist" to be the same thing regardless of topic -- especially when it comes to subjective matters like this.

There are many possible reasons and permutations of combinations of reasons. It's not up to us to come up with every possible reason for you. It's up to you to determine reasons that matter to you and to use those to do whatever it is that works for you.

Management is one reason that you mention. Everyone isn't comfortable or capable of managing the same number of cards. For some 1 is enough. For others more are enough. You have to determine how many you can reasonable manage. You have to actively monitor all open accounts regardless of whether or not you're using them. There's a limited time in which you can deal with fraudulent transactions. I also just recently posted in a thread where one wasn't paying attention to an unused account whose fee changed from annual to monthly and that person ended up with a 30 day late. If you cannot or will not actively monitor unused/sock drwared accounts then you may want to consider closing such accounts.

Personally, I don't see the a need to keep any account open that is of no use to me. Consider that not everyone needs or wants to hoard credit. One doesn't need to hoard credit to build credit. I've closed unused accounts many times and my FICO 8's are in the 800's.

AF isn't the only consideration for everyone when it comes to deciding whether to close or not even if that's important to you.

Use whatever your specific criteria are along with the information in the Closing Credit Cards thread linked in the Helpful Threads sticky to make your decision.

@Anonymous wrote:
If you have them as "padding" then you need to re-evaluate your spending and get it in check with your income.

Don't assume those things to be mutually inclusive. One can want padding to get revolving utilization down to 1% or whatever level without any micromanagement even if spending is in check.

@wasCB14 wrote:

As far as the whole "monitoring for fraud" business...that's what email/text activity alerts are for: card-not-present and large transaction alerts for everything, and non-zero balance alerts on cards you rarely use.

Alerts are a form of monitoring. The details of how one monitors are not really relevant aside from what works best for a given indiividual. As long as one is regularly monitring all accounts and not just assuming that there cannot be any problems if there is no usage that's all that really matters.

I don't want or need email or text alerts. I have no problems monitoring my 13 cards and could monitor more but I still close cards that are of no use to me. Again, don't assume that what works best for you works best for everyone on subjective matters like this.

@Mattopotamus wrote:
Unless the card has an annual fee, leave it open. It helps with your overall utilization and AAoA.

One should consider impact to AAoA and revolving utilization but that doesn't mean that everyone needs to keep all cards open for reovlving utilization and AAoA. One can calcuate the impact to revolving utilization due to closing an account and it may have little to no impact or the individual may not be concerned about the impact. Read the Closing Credit Cards thread I mentioned above. AAoA is not immediately impacted. Even so, AAoA is just one factor to consider, typically ~15%. My AAoA is just fine even closing cards that are of no use to me. More importantly, my scores are just fine and I have no problems qualifying for the products that I need/want.

Again, each needs to decide based on the individual's situation and other requirements versus relying on blanket statements like this. The "leave open if no AF" meme is popular but it's not a one-size-fits-all matter.

Re: Why Close Credit Cards?

MrsCHX — Thu, 19 May 2016 13:54:41 GMT

Definitely a case of YMMV (your mileage may vary).

I went on an app spree when I realized my credit wasn't as bad as I thought Still not GOOD, but not TERRIBLE like I assumed. I got NY and Co using the shopping cart trick. I actually like NYCO but after 1 month and 1 order realized there are no longer any stores at the malls I frequent. And ordering online is a crapshoot.

Plus, it was a low limit card so neglible affect on utilization.

And, my oldest accounts are 19 years old and my app spree barely dinged my AAoA. So that is not a concern for everyone.

Lastly, I can see rebuilders getting to a stage where they should close out cards that are 'lower tier'. E.g., by fall of 2017 I will have no baddies with any bureaus. And will have grown some of my new tradelines. So at some point I'll close Merrick because while they're GREAT for rebuilders, it's otherwise not that great a card to have.

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 13:58:12 GMT

@wasCB14 wrote:
I closed a card for the first time a few weeks ago, and for the best of reasons: I'd already milked it dry for the bonus and extras and didn't want to pay another AF.

When I read threads in which the OP relates how he or she:
1. Got angry about something (often trivial in my opinion) and closed a low-earning cash back card in rage, or
2. Just decided it didn't have a place in the lineup anymore

...I wonder if they realize they might have had a bonus worth several hundred dollars on an AF card, closed it strategically, and ended up with the same AAoA.

As far as the whole "monitoring for fraud" business...that's what email/text activity alerts are for: card-not-present and large transaction alerts for everything, and non-zero balance alerts on cards you rarely use. I was a victim of the IHG MC hack a few months ago, got the card-not-present email, called Chase, and had a new account number within an hour of the fraud.

If your card's issuer doesn't offer them, try to switch to a lender that isn't stuck in the 20th century. The rewards will probably be an improvement.

Good point.

Re: Why Close Credit Cards?

Kevin86475391 — Thu, 19 May 2016 19:11:03 GMT

@Anonymous wrote:
@Kevin86475391 wrote:
Yeah, for me it's definitely to prevent fraud...
Great answer.

Thanks!

@takeshi74 wrote:
@wasCB14 wrote:

As far as the whole "monitoring for fraud" business...that's what email/text activity alerts are for: card-not-present and large transaction alerts for everything, and non-zero balance alerts on cards you rarely use.
Alerts are a form of monitoring. The details of how one monitors are not really relevant aside from what works best for a given indiividual. As long as one is regularly monitring all accounts and not just assuming that there cannot be any problems if there is no usage that's all that really matters.

I don't want or need email or text alerts. I have no problems monitoring my 13 cards and could monitor more but I still close cards that are of no use to me. Again, don't assume that what works best for you works best for everyone on subjective matters like this.

Yes, this is definitely very true for me. I think alerts are a great idea and can be very useful, but it definitely comes down to what works for the individual person and how they implement alerts. I know I'm the kinda of person who tends to ignore 'passive information' after awhile. For example the first email a company sends me, I notice; the 50th email they send me? Might as well be invisible. It's sort of like putting a new pen on your desk. You know it's there when you do it, and you probably notice it's there the next day when you see it for the second time...but after a few weeks if it's still sitting there it's just a piece of the scenary and you could be staring right at it while wondering where you put your pen. So for me I really want alerts for actual suspected fraud and major stuff, but alerts for spending over a certain amount or non-zero balances would just cause me to unintentionally ignore all alerts.

By contrast actively signing into my accounts a few times a week is a more active, intentional process, so I actually register what I'm looking at.

Re: Why Close Credit Cards?

Anonymous — Thu, 19 May 2016 20:32:55 GMT

I lick my cards, and close the ones that don't taste good.