Two Reasons Not to Cut Up Your Credit Cards

Find out why ditching the plastic can hurt your credit score -- and learn the right way to manage credit card debt.

Medically reviewed in September 2020

If you’re dealing with debt, it might seem like the logical move to cut up your credit cards and walk away – but DON'T. Here's why:

1. If the card still has a balance on it and you cancel the card, the credit bureaus won’t find anything on your report for “available credit” and the “credit limit.” That’s good, right? Wrong. Since you still have a balance on the card and no credit limit is listed (since you closed the account), it actually looks like you maxed it out. And that can—and likely will—wreak havoc on your credit score.

2. If you have paid off your balance, but cut up your card anyway, you’re missing out on a valuable, steady payment history. Remember, you’re going to need that credit down the road to take out a loan, buy a house or negotiate better deals on existing payments. Cutting your card is essentially taking you out of the game before you have a chance to play. And even if you do have a good reason to close a card (it charges exorbitant annual fees or stops offering the perks that made you sign on in the first place), cutting it up isn’t all you have to do:

  • You have to tell someone! If you cancel over the phone or online, follow up with a signed letter to your credit card company’s customer service department stating that you wish the card to be canceled and a brief explanation of why you are canceling.
  • Ask for a written confirmation in response from them, stating that the account has been closed. Monitor your credit reports to make sure the account is no longer active.

You can keep the card alive by leaving one recurring payment on it, like a utility bill, and using auto pay. That way, you don’t have to think much about it, and it’s still active. In the meantime, to help get your debt under control, start switching a majority of your daily spending to a debit card--that way you are spending money that’s actually in your bank account. Studies show that people using credit cards spend 12% to 18% more when using credit rather than debit cards. If you are having trouble sticking to your spending plan or anticipate doing so, you’re better off resisting temptation by becoming a debit devotee.

Find Out: More Smart Tips for Managing Your Money 

Excerpted from: RICH BITCH, by Nicole Lapin. Copyright © 2015 Nicole Lapin. Rich Bitch is a trademark used under license from Nothing but Gold Productions. Inc. Published by Harlequin. Reprinted with permission.

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