Getting rid of inactive cards to save money and time

[SolidSnake]

I have been an Amex green card member since 2005. I haven't used the card in years for anything other than their Credit Secure service which provides me with monthly credit reports (2 new reports every month). The total annual fee for the card membership + Credit Secure service comes out to $290.36 ($95.00 for membership + 16.28/ m. for Credit Secure). 

I am thinking of either cancelling my Amex account or downgrading it to a card without an annual fee (so it doesn't reduce the length of my credit history). The reason for that is I was interested in My Fico Ultimate 3B service that gives me the most comprehensive reports + scores on a quaterly basis. My first two questions:

1) Is it possible to downgrade an Amex Green card account to a no annual fee card account (and not lose the length of the account in the process)?

2) If it's not possible, is it worth it to close out my oldest account in order to switch to Ultimate 3B (given that it will lower my score)?

Other info: I have a total of 10 credit cards, one paypal account with a spending limit, one credit account specific to medical services. I only use 2 cards for everything these days and 2 of the cards are being used by a family member with bad credit to pay off her debts (it's under control). All other cards have a zero balance and had no activity on them for a few years now. Limits vary from card to card but the card I normally use for everything has a 12K limit. I always pay off the current balance. Current FICO score acquired for free hovers around 720ish. I am not planning on making any big purchases anytime soon (may be find a new appartment if my housing situation changes). My 3rd question:

3) It's very tempting to close out the inactive accounts as I don't see myself using them again. I know it's a bad idea for my credit score...what I wonder is how bad of a hit will I get on my score per card? Some of these cards have some useful features, others are completely useless. May be closing out an account and then letting my score recover and then closing out a different account can work? Personally I don't want to manage 10 cards even with no activity. May be 3-4 cards are more manageable. 

[Anonymous]

This is an important set of questions.  Glad you are asking.

We can help you better if you tell us the "date opened" for your three oldest open credit cards.  You are contemplating closing your oldest card.  That's ordinarily a red flag, but if it is only your oldest by (say) three months, it is not a big deal at all.  If, by way of contrast, all your other cards were opened in the last three years, so that your Amex Green is MUCH older, then it becomes more complicated.

It turns out that there is no downgrade path at Amex from a charge card to a credit card:

http://www.doctorofcredit.com/best-downgrade-options-rules-for-each-card-issuer-rules/#American_Expr...

And I think that all Amex charge cards have annual fees.  So the very smart downgrade option idea may not work in this case -- happy to be corrected by someone more knowledgeable.

I think that you should not mix this decision up unnecessarily with the decision about the myFICO Ultimate.  That is only one credit monitoring approach (CMA) of many.  Some CMA's cost you zero dollars per year (or almost zero).  Instead I think you should make the decision about whether or not to close vthe Green independently of the decision about what CMA will be right to replace it with.

You sound like you are under the impression that closing cards will hurt your score.  This is a common belief but untrue.  As long as you end up with four cards you like (in your case I'd lean toward five) and as long as you can still keep your utilization very low (bearing in mind the smaller credit limit you will have) closing the cards will have zero affect on your score.

Closing your oldest card can have an effect on your score ten years from now when that old closed account falls off your reports.  That's why I asked you for the Date Opened of your three oldest open credit cards.

Congrats on taking steps to avoid fees and save yourself money.  This is a GREAT decision.  We can help you further about the "close or not to close" decision if we learn more details about your situation.  We can also help you decide what CMA is right for you.

[SolidSnake]

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@Anonymous wrote:

We can help you better if you tell us the "date opened" for your three oldest open credit cards.  You are contemplating closing your oldest card.  That's ordinarily a red flag, but if it is only your oldest by (say) three months, it is not a big deal at all.  If, by way of contrast, all your other cards were opened in the last three years, so that your Amex Green is MUCH older, then it becomes more complicated.

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It turns out the Green Card is not my oldest card. The oldest card is a Capital One Card that was opened in Dec 2004. That card is still open despite no activity for several months (or a couple of years). I also had another card with them that was opened in 2013. I just closed the newer card and merged the balances - this option to merge balances was not available previously. The second oldest would be the Amex card that was opened in 2005. The third oldest card that is still active is a Discover from 2010. 

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It turns out that there is no downgrade path at Amex from a charge card to a credit card:

http://www.doctorofcredit.com/best-downgrade-options-rules-for-each-card-issuer-rules/#American_Express

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You are correct. Amex rep confirmed that the Green card is the lowest tier charge card and there is no downgrade option. 

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I think that you should not mix this decision up unnecessarily with the decision about the myFICO Ultimate.  That is only one credit monitoring approach (CMA) of many.  Some CMA's cost you zero dollars per year (or almost zero).  Instead I think you should make the decision about whether or not to close vthe Green independently of the decision about what CMA will be right to replace it with.

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I have been wanting to close down the Amex card for a while now. The only reason why I have it open is the Credit Secure service. With the annual amount I pay for both the card and the CM service, I can probably get something more comprehensive in the same price range. Experian now gives away the report for free with a free account. So I only need access to the two other reports on a regular basis. All major cards offer one FICO score for free so I don't necesarily need that unless I am about to make a big purchase. 

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You sound like you are under the impression that closing cards will hurt your score.  This is a common belief but untrue.  As long as you end up with four cards you like (in your case I'd lean toward five) and as long as you can still keep your utilization very low (bearing in mind the smaller credit limit you will have) closing the cards will have zero affect on your score.

Closing your oldest card can have an effect on your score ten years from now when that old closed account falls off your reports.  That's why I asked you for the Date Opened of your three oldest open credit cards.

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Understood. I am very much in favor of closing down any unused accounts as long as they don't have a negative impact on the score. I realized 2 of the accounts I mentioned previously were already closed out due to lack of activity...strangely, I can still log in to the websites and look at my account and check my FICO score. I never noticed the available credit limit had been reduced to zero though. 

I am more motivated to close the Amex account now. If I can find a CM service that gives me access to TU + EQ reports. FICO scores would be cherry on top. 

P.S. I am aware of the free reports I can pull once a year - I still want something I will have access to on a regular basis. 

[HeavenOhio]

Credit Karma is free, and it will give you TU and EQ reports, updated weekly. However, the scores are VantageScores rather than FICOs.

If you go with myFICO, consider this service rather than Ultimate:

http://www.myfico.com/Products/FICO-Premier-3B/

It's the same price as Ultimate. However, reports are updated monthly rather than quarterly.

[SolidSnake]

Thanks for the suggestion. What about closing the Amex account? Is that going to have a negative effect on my score? And how bad will it be? It's a charge card, not a credit card. 

[Anonymous]

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@SolidSnake wrote:

Thanks for the suggestion. What about closing the Amex account? Is that going to have a negative effect on my score? And how bad will it be? It's a charge card, not a credit card. 

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What I wrote earlier still stands:  "As long as you end up with four cards you like (in your case I'd lean toward five) and as long as you can still keep your utilization very low (bearing in mind the smaller credit limit you will have) closing the cards will have zero affect on your score."

The only caveat is that I am not sure what your three oldest open accounts are.  It sounded like they might be:

      Cap One (Opened Dec 2004)

      Amex Green Card (Opened 2005)

      Discover (Opened 2010)

But later you write:  "I realized 2 of the accounts I mentioned previously were already closed out due to lack of activity."  You also mention in another place that the Cap One has not been used in years.

So can you clarify whether your Cap One card (from 2004) is still open?  If so, I'd take swift steps to use it soon and then use it once every six months after that.  It's crucial that this card not get closed if you can help it.

Otherwise, close any cards you want, but hang on to five and make sure that you are confident your total CL is big enough to easily have a small utilization.

[SolidSnake]

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@Anonymous wrote:

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The only caveat is that I am not sure what your three oldest open accounts are.  It sounded like they might be:

      Cap One (Opened Dec 2004)

      Amex Green Card (Opened 2005)

      Discover (Opened 2010)

But later you write:  "I realized 2 of the accounts I mentioned previously were already closed out due to lack of activity."  You also mention in another place that the Cap One has not been used in years.

So can you clarify whether your Cap One card (from 2004) is still open?  If so, I'd take swift steps to use it soon and then use it once every six months after that.  It's crucial that this card not get closed if you can help it.

Otherwise, close any cards you want, but hang on to five and make sure that you are confident your total CL is big enough to easily have a small utilization.

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I should have been clearer. The two cards that were closed due to inactivity are not the oldest cards. They were opened within the last 5-7 years and I had mentioned them in my original post. That's why I said they were mentioned previously. 

The card from 2004 is still open but hasn't been used in a couple of years. The rep told me they won't close it but I will use it every now and then anyways to keep it active.  

According to Experian I am only using 21% of my total available credit and I don't think Amex counts towards the total available credit, so closing Amex should make no difference in that regard. 

Some other cards (from the same bank) I will merge so the CL should stay the same. 

[Anonymous]

PS.  You will get a scoring benefit if you can get your reported utilization to < 8.99%.  That's just a side thought.

Otherwise sounds like you have a good plan and should be fine.