How do you sock drawer your cards?

[elim]

In the safe, and like all my cards they have text alert if a purchase greater than $1 hits (and on prism) so they are "out of site, out of mind" until needed again.

[icyhot]

I tried to SD some store cards I had but I'm really iffy about having a bunch of cards open so I closed them. I ended up closing 3 capital one cards (1 was right after I got it in the mail) and 6 store cards. Now all the cards I have atr useful with good benefits. My UTI is currently at 18%, working on paying that down. But rather that than have a bunch of useless cards

[Odiseous]

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@kdm31091 wrote:

Yes but the aging argument doesn't completely hold up for me because AAOA is unaffected by closing accounts. They will age just fine even if you close them. Yes, they fall off at 10 years but the idea is your open accounts will have aged plenty in 10 years!

I can understand just not bothering to call and close it. To me the advantage is that you don't have to manage the card, make a charge every so often, worry about fraud, or anything, once it has been closed. Whether managing it is worth the slight trouble for someone is a personal decision, same as SD vs closing.

You make a point about bonus offers to keep using the account. In practice, I dunno how often it actually happens, but it is possible. I am not keeping a card open in the hopes of a bonus offer that may never come but everyone's different :-). PCing is a good point, but that is more an argument against SD a card because if you PC to something useful, hopefully you'll actually use it!

I won't SD a card for emergency use because the cards I have open/actively using are enough buffer for me if something does happen. I do want a low APR card someday but it is not high on the priority list simply because I have a savings account with a cushion for the unexpected and hope I wouldn't have to charge an emergency to a credit card.

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This can both be good, and bad. I was about -><- that close from moving my CL from Chase Slate to Chase Freedom, then closing Slate (since my 0% BT was over by a few months); but I got lazy. When I started to re-think leaving it open a couple months later, BAM!, I got a 0% BT offer for 12 months (2%BT fee), I changed my mind on closing it, as I needed to move debt from by Discover IT (the 0% APR was expiring). In the end, it worked out for me. But thre is no guarantee.

[maksimfa]

I am really glad this thread evolved to this.  As a financial planner, here are my two cents.

Credits cards are not an emergency fund. 100% correct.

Credit cards MAY be the solution for some people, or half of america that does not have enough savings.

For most people, we recommend 6 months of committed, non-discretionary expenses.  Notice not 6 months of salary.  Why?  People are just as likely to be in the hole every month.   So, 6 months of expenses that need to be paid... 

So, if someone loses their job, assuming an average male, would take 3 to 6 months to find another job.  You would have those expenses in savings. If you have an emerency, figure you would be ok not going out to eat every other day, or going to the movies weekly, or supporting the 2 cups of Starbucks a day habit.

6 months of expenses also does not mean you keep 100% of that in a savings account earning you nothing.  You would have a cash reserve strategy,  so that funds would be avail within 2 to 3 days.  A typical 6 month cash reserve strategy would look like 1 month of expenses in checking. 2 to 3 months of expenses in a high yield savings or money market, (about 1 to 1.5%) (yes... we have them.), and 3 months or more of expenses in a short term, or low duration tax free fixed income fund (about 2 to 3%).  

For folks who do not have the savings yet... or are working on it, we temporarily can use a HELOC to backstop that cash reserve strategy.  If no home,  you would use credit cards.

Look, if you lost your job, and you have no money, and you need to put food on the table, or your roof is leaking, your boiler blew up, you do what you have to.  If credit cards is it, then do it, then responsibly get yourself out of the hole.

Having said that... why would you want to close a card, that costs you nothing to keep open, and is not preventing you from getting new credit?  It is just irresponsible.

NO ONE IS GOING TO LEND YOU MONEY WHEN YOU MOST NEED IT!.

For the same reason you do not build a cash reserve DURING an emergency, you do not get rid of available credit just because you don't need it.  That is the point, you don't want to have to use it... but you need to have it there during those bad times.

Ford survived because they did not get rid of their lines of credit and kept them open.  

Beyond that, every client I work with, gets a securities backed line of credit... a LOC against the investment portfolio that they have.  Typically 50% to 95% of their investments.  We can get a LOC for as low as 1%, and it costs nothing to maintain.  What that gives you is flexibility.

Want to buy a house?  Sure, buy it on the line of credit, pay low interest, if you want to mortgage it later, sure.

Why sell off investments that work, when you can borrow money dirt cheap?

Credit is a tool.  You must be responsible and be honest with yourself.

That would be the ONLY reason I can think of, and recommended clients to close their credit cards.... and that is when they went full degenerate and charged up all the cards, not due to emergency, but just because.  

Americans are broke in part because they think of...

"Can I afford the monthly payment?"  Instead of... "Can I afford to pay it out of savings?"  

If you can afford to pay it out of savings... then use credit cards to earn rewards, etc, and pay it off in full.  

Obviously the exception is a house, where well... the American dream is stronger than fiscal prudence... and that is why it is ok to borrow money for a house.  Then again, the House is the only thing you woul buy that goes up in value.

Not a car, that iPhone 6, dinners at fine restaurants, or any other crap.  

Unfortunately, the American economy is all based on the "I Want" instead of the "I Need."

Ok... sorry for the derailment.... but I hope that helps. =)

[Anonymous]

My problem is that for the moment I have to SD them. My util is way too high so closing accounts is the last thing I need to do. That said, what's the best strategy for keeping store cards open, ones where I can't just buy a couple of sodas at the BP.

[maksimfa]

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@Anonymous wrote:

My problem is that for the moment I have to SD them. My util is way too high so closing accounts is the last thing I need to do. That said, what's the best strategy for keeping store cards open, ones where I can't just buy a couple of sodas at the BP.

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I have not had store credit cards that were closed... ever.  There is no reason for them to. 

To get CLI, I do have a JC Penney card that you can use at CVS.  Beyond that, I have not used it in 8 years... and still open.  In regards to the above post... short of a Walmart store card... if they really do close the store card on you, not the end of the world... not likely it would save you anyway.

[Anonymous]

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@maksimfa wrote:

Thanks for the kind words and comments.  I was inspired by this to write a more complete discussion on this topic.

Mod cut-link to personal website/blog

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Thank you for this good analysis.

As a die-hard member of "close cards when they are not useful" let me explain where I disagree with one small part, it being irresponsible to close no AF cards.

1) Very low CL cards.   If I have a useless $300 (or $500 or whatever) card and I can't get CLIs, it's really not going to make much of a difference in an emergency.  Yes, you could say every bit counts but there is an overhead in keeping the card open, month after month when there may never be an emergency, so I'm not convinced that the cost/benefit is really there

2( AF cards:   And I don't see why a similar analysis doesn't also suggest keeping cards with AFs open.   About three years ago I closed a $30K CL card, which has an AF of $85.   So while that IS costing money, it is a great potential cushion for an emergency, so should we keep high CL medium AF cards open as well by your reasoning

[Anonymous]

My Wells Fargo Platinum Rewards Visa is the card in my signature that receives the least amount of use BY FAR. I keep my monthly myFICO monitoring on that card to keep it active, but that is the only thing charged to it anymore now that I have some better rewards cards. 

That said, I don't see the purpose in closing it. First of all, it's the card with the lowest APR in my sig (not that big of a benefit since I never carry a balance on credit cards). But more importantly, I hope that WF will eventually revamp their credit card portfolio and I can PC this card to a better rewards card. And if I ever want to take out a mortgage with WF, they might value our business relationship a little more if I have an open credit card with them that I've had for a few years.

To me, it seems like there's a lot of potential for good with SDing instead of closing, but minimal potential for good with closing instead of SDing. (It really isn't that hard to log in once a month and check to make sure no crazy charges have appeared on a credit card that you don't use). There's a case to be made that a lot of useless unused credit will affect your rates on future applications for credit, but that's really the only one that holds much water (and, in my opinion, that doesn't outweigh the potential for good by keeping it open).

[takeshi74]

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@Anonymous wrote:

To me, it seems like there's a lot of potential for good with SDing instead of closing, but minimal potential for good with closing instead of SDing. (It really isn't that hard to log in once a month and check to make sure no crazy charges have appeared on a credit card that you don't use). There's a case to be made that a lot of useless unused credit will affect your rates on future applications for credit, but that's really the only one that holds much water (and, in my opinion, that doesn't outweigh the potential for good by keeping it open).

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Each has to make these sorts of assessments for themselves.  "To me" is never the same thing as "to everyone".  Different people have different numbers of cards that they can or are willing to manage.  I'm also in the camp of not keeping useless/SD cards around.  There are quite a number of subjective matters that factor in as well as the potential impacts to credit.

[Anonymous]

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@takeshi74 wrote:

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@Anonymous wrote:

To me, it seems like there's a lot of potential for good with SDing instead of closing, but minimal potential for good with closing instead of SDing. (It really isn't that hard to log in once a month and check to make sure no crazy charges have appeared on a credit card that you don't use). There's a case to be made that a lot of useless unused credit will affect your rates on future applications for credit, but that's really the only one that holds much water (and, in my opinion, that doesn't outweigh the potential for good by keeping it open).

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Each has to make these sorts of assessments for themselves.  "To me" is never the same thing as "to everyone".  Different people have different numbers of cards that they can or are willing to manage.  I'm also in the camp of not keeping useless/SD cards around.  There are quite a number of subjective matters that factor in as well as the potential impacts to credit.

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Yep. Like I did.