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How do you know when you should cancel your credit card?

How do you know when you should cancel your credit card?

Thinking of cancelling your credit cards? You may have overspent on your cards and decided to cut them all up. Or, maybe you have looked in your wallet and wondered why there is so much plastic in there. Perhaps your cards have cobwebs on them from lack of use. There are many valid reasons for closing your credit card accounts, here are a few of them.

You’re paying too much in interest

Unless you pay off your balance in full each month, then you should be wary of how much you pay in interest on your credit cards. Anything over 15% is too high. Try to aim for a card with 10-12% interest to save some money.

You’re paying too much in annual fees

Think about what services you are getting from your credit card, and whether it is worth paying the annual fee each year. Rewards, Gold and Platinum cards can have hefty annual fees, but if you’re not using the services they provide, is it really worth it? Think about switching to a low or no annual fee card.

You’re not getting the rewards that suit you

Rewards cards really only reward big spenders. Think about what rewards you are actually receiving for the annual fee you pay, and work out if you are actually benefitting from having the card. Low fee or low rate cards will cost you less.

You never use the card

Some people only use their credit cards for emergencies. If this is you and you are paying a high annual fee, it might be a better idea to switch to a no annual fee card.

You have too many credit cards

If you have a wallet that bulges with credit cards that you never use, it could be a good idea to get rid of some of them. Think about how much you need each card, what it gives you, and what you are paying for it.

You have too much debt

If you have significant debts then it may be a good idea to get rid of your credit cards. A consolidation loan could be an option, but remember not to start spending all the free-up credit after the loan has paid off your cards.

You tend to overspend

If you have a tendency to overspend, then credit cards probably don’t help. Having available credit on your credit cards can provide too much temptation, so if you think they are causing you a problem, you may want to cancel some of them.

When to keep your cards:

Try to keep the credit cards you’ve had the longest. Building a lasting relationship with your credit card provider can be extremely beneficial, and it also looks better on your credit file.