Ask yourself this question: is tossing away my credit cards beneficial to my long-term finances?
When you find yourself in a mountain of debt, you might question how much you need your credit cards. Toying with the idea of cutting them up and swearing them off for good so that you can’t accumulate more debt might cross your mind, but is this really the right thing to do?
Ask yourself this question: is tossing away my credit cards beneficial to my long-term finances? To put it simply: no. Getting rid of your credit cards serves one good purchase: you can’t use them, and therefore, you can’t increase your amount of debt. However, teaching yourself how to control and better manage your money has benefits that will serve you better in the long-run compared to throwing in the towel and just giving up.
1. Just because your cards are in the garbage doesn’t mean that your debt is. You still have to pay off your debt, no matter how many cards you cut up. Not to mention, the history of your cards will stay on your credit report for up to six years even if you pay it off and the account is closed.
2. Closing a credit card with a balance eliminates the remaining credit available on the card and makes the account appear to be maxed out. If potential lenders look at your credit report and see that you have no credit available on that account, it could raise a red flag for them.
3. If the card you’re closing has a good history of paying on time, you’re essentially getting rid of something that boosts your credit score.
4. Dropping a credit card from your account could make your list of credit less diverse. Credit diversity is incredibly important because it shows you can handle all sorts of credit, and it could boost your credit score.
5. Getting rid of your credit card makes a lot of things more difficult: booking travel, shopping online, managing your expenses in between paydays, etc.
If you’re having a really hard time getting your spending under control, or if you have someone on your account who can’t stop spending, throwing out your credit cards might be your only option. However, transferring your debt onto a low-interest balance transfer card is a move that could help you get a handle on paying back owed money.
Learning how to manage money isn’t something that we’re taught in school – everyone figures it out one day or another, and seeing as this learning experience could help built your credit and save you money, why not start now?
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