Closing a credit card account is a big decision and a decision that most people do not know when to make. It is critical for them to know when they should think about closing their credit card account, especially if having it open is causing them distress. The following reasons will help you decide on when is the right time to start thinking about closing your credit card account:
1. It Does Not Offer Any Rewards
You do not have to think twice about closing a credit account that does not offer you any rewards. With so many cards offering people rewards, you need to switch to one of those and get rid of the one that you currently have. However, there are times when you will need to close a credit card that earns you rewards. If the rewards are difficult to earn, you should switch to a card that offers rewards, which are easy to earn.
2. A Pending Annual Fee
Have you obtained a credit card on which you have to pay a huge annual fee? If you are thinking of closing it, you need to examine the value of the credit card to determine if you should close the account or keep it open.
You have to look at the benefits the card offers you and if the cost outweighs the benefits, it is time to close it. For future reference, when you apply for a credit card, you need to look at its features and consider how many of its features you will actually use. If you end up not using any or use one or two rarely, you should close the account.
3. High Interest Rate
You should not carry a balance on a credit card with a high interest rate. Instead, transfer it to a card that carries a low interest rate. Before you begin to transfer your balances to other credit cards, you need to understand the charges associated with balance transfer. Most credit cards charge 3 percent from the amount transferred to another card. Some credit cards convert balance transfers, changing them to cash advances.
4. Close Your New Card; Use Your Old One
The duration you have your credit card influences your credit card score. If the card is old, but you never use it, you should use it. The credit card company will either consider the account as inactive and close it or bill you an inactivity fee. Closing the old credit card will affect your score negatively. Keep it open and use once or twice each month.
If you want to increase your credit card score, close your new card, but only if results in a superior average age for the credit cards you have open. If you obtained a new card to benefit from its introductory rate, which is about to expire, you should close it.
Analyze all your credit cards to see which ones you can let go and which ones you need to keep.