Right now you are asking Google whether or not you should cut up your credit cards.
I will tell you the answer. . .
Cut up your credit cards now!
If you are in a bind with your credit cards or credit score, cut them up. Save one you can still use for emergencies (real emergencies), and cut the rest of them up.
If you just finished paying off that credit card bill that you have been paying back for years, cut it up! That one should feel particularly good. But when you’re done cutting, don’t run to the phone to cancel your card. Read on to find out why.
Cut Don’t Close: Closing Credit Cards Can Hurt Your Credit Score
Cutting up your credit cards will keep you from using them. Closing credit cards can hurt your credit score.
According to FICO, the main credit score people, your credit utilization is an important piece of your credit score. Your credit score looks at how much you owe, but it also looks at your available credit.
Your credit utilization is the percentage of available credit that you are currently using. I have posted a Credit Utilization Calculator tool that will automatically help you figure your utilization.
You want to keep your credit utilization at 30% or less. For example, if you have a $10,000 credit line, you want to keep a balance under $3,000.
This ratio counts for your accounts overall, as well as for each individual account.
By closing your accounts, you are raising your credit utilization because your total amount of available credit goes down.
Another factor in your credit score is the age of your credit accounts. The longer an account has been open with positive history, the better. Your accounts are aged across your whole credit profile. Therefore, when you close an account, your average account age goes down.
Best Way to Pay Off Credit Card Debt: Stop Digging
Forget magic formulas, the absolute best way to pay off credit card debt is to throw away the shovel.
My credit card was a shovel. Maybe even a backhoe. You will never get out of debt if you don’t stop digging.
Take away the chance to talk yourself into using your credit card. I started charging groceries because I would get 1.5% cash back. Then I got the brilliant idea that if I charged everything, I would be rolling in cash back rewards. The credit card companies would be wringing their hands, cursing my riches. Brilliant idea.
That’s a great plan if you are watching your budget and paying off your balances each month. My budget consisted of a rough guesstimate, followed by a much too abstract idea of money.
When you charge things, it doesn’t hurt as much. It’s much easier to talk yourself into making that purchase that you shouldn’t when you have your card ready to go.
Take away the card, the moment passes. Throw away the shovel, and the hole stops getting deeper.
Do Something! Start Fixing your Credit Now
The important thing is to do something! The fact that you are even asking Google whether you should cut up your credit cards shows that you are thinking about taking action. You need to start fixing your credit now. The sooner you start, the sooner you will start to see the benefits. Time is on your side when it comes to your credit report.
The act of cutting up your credit cards is symbolic. It says you are done using that card with an exclamation point. It says you are ready to start doing something about your credit issues.
The bonus? Cutting up your credit card goes beyond symbolism.
It sounds simple: If you don’t have it, you can’t use it. But it’s true.
So start cutting up your credit cards and stop digging. Start getting your life back!
Have you cut up your cards yet? Leave a comment, we’d love to hear from you!