Credit Cards: When To Hold Them, When To Fold Them
Choosing which cards to close can affect credit
For Immediate Release: March 17, 2005
ROCKVILLE, Md. — With offers arriving in the mail, department stores offering 10 percent off when you apply and free gifts being hawked at the mall for filling out a form, it can be easy to end up with a wallet full of credit cards. But when looking to lighten your credit load there is a right way and a wrong way to close credit cards.
"The first thing most people do when they want to close a credit card is take out a pair of scissors and start cutting, but that doesn't close an account," said Steve Rhode, president of Myvesta, a nonprofit consumer education organization. "To properly close a credit card account you should send a certified letter, return receipt requested, to your card issuer and request that the account be closed and reported as "closed by consumer." They should then follow up with a letter stating the account is closed. If they don't send you confirmation it's a good idea to follow up with a phone call."
According to Rhode, it's important to carefully decide which cards to close and when to close them.
"The length of your credit history makes up a significant portion of your credit score so make sure you keep your oldest accounts open and active," Rhode said. "Closing too many accounts at once increases the proportion of the balances on your cards to your total credit limit, which in turn could lower your credit score as well. And if you close a card while still carrying a balance your creditors might raise your interest rates as a penalty."
Rhode also recommends reviewing your credit reports when deciding which cards to close or to check that closed accounts are being reported properly. To obtain a consolidated copy of your credit report, containing information from all three credit bureaus, visit Myvesta.org online.
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MyvestaSM is dedicated to helping people create healthy financial lives. The organization provides a wide range of materials to inspire and inform people so that they can break down their barriers to financial and personal success. For more information visit Myvesta.org online.
