Why Close Credit Cards?

[vwgrrc]

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

[creditgambler2018]

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.

[sr383]

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.

[Anonymous]

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. 

[Kevin86475391]

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! 

[vwgrrc]

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! 

[Anonymous]

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.

[Anonymous]

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.

[creditguy]

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 

[Anonymous]

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