Should I close my credit cards?

Question

I have 5 credit cards with 0 balance on all of them. 2 of them have $300 credit limit and they are open in less than a year. Others have bigger limit. If I continue to use them for the next year there is $69 annual fee on each of those two cards. Should I close them before next year start or this is going to lower my credit score?

Answer 1

This depends.

Closing cards may drop your score because it will reduce the amount of available credit, reducing your "credit utilization" ratio.
The lower the percentage of credit utilization, the better. Creditors consider utilization percentages of 30% or lower to be best (higher credit usage is considered risky by creditors)

For example, if you have 2 cards each with a limit of $1000 and one of the cards has a balance of $500 with the other card with zero balance, you are borrowing $500 out of a total of $2000 of credit (two $1000 cards = $2000). Therefore, your credit utilization is a healthy 25% (within the desired 30 % limit). Now, if you were to close the card with with no balance, you would be reducing your available credit from $2000 down to only $1000. You are now using $500 out of $1000 credit - you have increased your credit ultization from 25% to 50%!

Another factor in credit scores is credit history. It is not recommended closing cards that you have had for a while - doing so will eliminate your history and experience that creditors like to see, demonstrating that you have dealt successfully with credit for a while. In your case, since the cards are failry new, I wouldn't be too concerned - unless you are fairly young and all your cards are new.

I would only recommend closing a card if you have poor spending habits and get into debt easily. Closing a card will prevent you from getting into debt further. If you don't have a spending issue but yearly fees are significant and costing you too much, then close the card if your credit utilization won't be effected that significantly (especially if you have a lot of available credit with other cards) or if the cards are new, as it looks in your case. Credit utilization is only one factor in determining your credit score.

Answer 2

it is bad to have credit cards that are not being used because if you ever wanted to apply for a loan then they would be considered a possible future debt. They add up all the amounts available to you on the cards and hold that number against you. with too many cards you also have the risk of losing one as well. I would keep the one with a good enough allowance to get you through a car emergency that is widely excepted everywhere. Also check to see if that one has the lowest interest rates and service charges. Cut up the rest and CALL to close them. The 300 one sounds like a card for a store. That one most likely has a hih interest rate Cut it. you want either a visa or mastercard.
Your credit score is only effected if you use them, and use them badly. You only build credit by using the card and payin it off consistantly over a lon period of time. Buy somethin for 100 bucks use the card, and then the next day take 100 out of your bank account and when the bill comes pay off just a little above the minimal balanced asked of you. You do this until its paid off. If you pull the money aside as you spend it then you are sure to not acrue debt. You are not spending money you don't have you are just spending to get a better credit score.

Answer 3

Close the accounts and cut them up. First you will avoid the annual fee associated with a card that has a zero balance which is crazy to begin with. Second, it shouldn't lower your credit score. When you go to make major purchases, they look at what your available credit is. If your available credit is high that is usually considered bad. I would even consider closing one more if I could.

Answer 4

Cut up your credit cards. They are bad news and could cause you problems later in life.

Answer 5

if you close a cr. card your credit score will drop. Cut them up and toss them.