Keep or Close Zero Balance Credit Cards? Please Advice.

[Ghulam]

Hellow everyone,

This is my 1st post in this Forum. Here is my Situation, I have Following C/Cards:

1) Amex Blue. C/Limit: 7K. Curr. Balance: $373.00.
2) Bank Of America Cash Back Visa: C/Limit: 22K. Curr. Balance: 0.
3) Chase Cash Back Visa: C/Limit: 9K. Curr. Balance: $147.00.
4) Citi Dividend Master Card: C/Limit: 11K. Curr. Balance: 0.
5) Citi Home Rebate Master Card: C/Limit: 15K. Curr. Balance: $895.00. (This Card Has a promotional Rate of 0% Until Dec. 17th, 2008).
6) Commerce Bank Over Draft Protection: C/Limit: 4K. Curr. Balance: 0.
7) Raymour & Flanigan Furniture Store Card: C/Limit 6.5 K. Curr. Balance: 0.
8) Home Depot Master Card: C/Limit: 18K. Curr. Balance: 0.

Most of the cards I have for a long time but hardly use them and I payoff the Full Balances of them long before they are due. And I just carry 2 in my wallet.

I also have an auto loan of 15K (60 months with a 3.99% apr, 44 months remaining). Besides that just Fixed Rate Home mortgage which We pay 13 Payments instead of 12 per Year.

My questions is that: Should I cancel the Credit Cards with Zero Balances although many of them have High Credit Limit or Just don't carry in my wallet like currently I am doing? Having many credit cards with Zero Balances hurt or improve Credit Ratings?

Thanks in advance for your opinion.

[hermione]

I recently wrote a blog post about how closing some of your credit cards can hurt your FICO score. It depends on how many accounts you have in your history and how old they are. Closing older accounts could hurt your credit history and score by shortening your history.

For example, say your first credit card was opened in 1999. You didn't open any more accounts (credit cards or loans) for another 5 years. If you close the account you opened in 1999, you could lose 5 years off your credit history if/when the bank decides to purge their records. I think the average time for them to keep your records is 10 years, but some lenders might purge their records sooner than that.

You can get more details on my post:
Closing Your Credit Cards Can Hurt Your FICO Score

I'm not a credit expert, though. I gathered the information from several sources including bankrate.com and suggest you get more input from others before making any decisions.

[kav122]

I understand what Hermione is saying, but I would say close them. Closing them means less chance that something could get charged on them. I think that with less (or no) cards, you decrease your risk. If the cards were to get stolen, (and since you rarely use them you might not see that they are missing) you would at least have a major headache cleaning them up.

Finally, why do you need a good FICO? Are you wanting to get more credit cards or thinking of buying another car? Pay cash. Save up. If in the future you would like to buy a new house, then you can always get someone to do manual underwriting for you. That's where they approve/don't approve the loan based on a lot more than a FICO score.

I'm sure many have really good arguments against that, but I think simpler is better.

[khorrell]

I think they are both valid points. The thing in your original post that jumped out at me was the "in my wallet" part. If you choose to keep the accounts I would definitely remove them from your wallet and either put them in a really safe place or destroy them. You can keep the accounts open without having a physical card available to be stolen or mis-used.

Good luck, it sounds like you are in a pretty good place.

[hermione]

Originally Posted by kav122

Finally, why do you need a good FICO? Are you wanting to get more credit cards or thinking of buying another car? Pay cash. Save up. If in the future you would like to buy a new house, then you can always get someone to do manual underwriting for you. That's where they approve/don't approve the loan based on a lot more than a FICO score.

I'm sure many have really good arguments against that, but I think simpler is better.

Simple is better, but having a good credit score/report is a nice backup for when you're in a pinch. It's easy to say "Pay cash, save up," but with the economy as it is, it is getting a little more difficult to save up cash because necessities such as food and gas are costing more and more each week.

Having a good credit rating can help you to get better interest rates if ever need a loan or re-financing for your current loans, or approval for other things (a rental contract, employment, cell phone plans, etc.). I know Ghulam is doing well, and doesn't need to worry so much about this, but it doesn't hurt to keep your credit as good as possible.

With so many cards, you could probably close at least 1 or 2 or a few of them without hurting your credit too badly, but I would suggest keeping the oldest one open just in case.

I wouldn't carry so many around in my wallet though; I'd keep them at home in a safe place. And be sure to write down the customer service number to call to report lost or stolen cards, and keep the list of numbers in an easy-to-remember place - like the glove compartment of your car, for if you lose your wallet while you're out.

[Megan]

I agree with hermione on many counts. While a FICO score isn't everything, I would at least recommend keeping the oldest card open (provided that you don't have another card that you're still using that's older, of course). I think that Americans do worry too much about FICO scores and not enough about actual money, but at the same time, if you can keep your FICO score higher by simply not cancelling a card, then I think it's worth it.

But I agree - don't keep it in your wallet. Keep it at home. Or heck, if you never plan to use it, log the number somewhere and cut up the card.

[happysmileylady]

What I would do if I were you in this situation is transfer everything to the 0% intrest rate card and work on paying that off ASAP. In the meantime I would close 4 of your newest cards. I would also stop carrying any of it in your wallet.

[Ghulam]

Thanks for all your suggestion.

This is what I did today:

- Cancelled Item#4 (Citi Dividend Master Card) but to my surprise Citi Bank Transferred all available Balance of that Card to Item #5 (Citi Home Rebate Master Card). This card automatically puts 3% Cash back towards the Principal of our Home Mortgage (Our lender is Citi Mortgage).

- Cancelled item # 7 (Raymour & Flanigan Furniture Store Card) and #8 (Home Depot Master Card).

So, now I have just 4 C/Cards (Item# 1-3 and #5). If I charge in a C/Card, I pay that full amount within 5 days. I use C/Cards just to get cash back (i.e. taking the advantage of them with their own game plan).

My Life was always not like this way Folks. In early 90's I had a Six figure income working in IT field in High Flying Corporate world but never saved a dime; worse with my reckless behavior I had over 50K C/Cards debt. Did not open C/Card statements, just tossed them in Garbage. I was in total Denial. Wife was the prime bread earner with less income than mine.

In Mid 90’s, I left Corporate world, took 30% pay cut to accept a Job in a non-profit organization. My friends within 2 years, I become debt free with less Income. Because I do not have After work Happy Hour Parties like Corporate world. Besides, I enjoy my current job, big mental satisfaction/happiness because I feel I am contributing something for the Society. I learned how to be a disciplined, considerate and passionate person. Most importantly a good Father and a good Husband.

Today, my life is wonderful. Just a small example: In my house hold, we have a House Tax; every day after breakfast both of us put 2 dollars in a Piggy bank. Sounds like nothing but each year after Thanks Giving dinner, we open our Piggy bank. It is close to 1500.00; enough to by X-Mass gifts for our Family of 5 people!!

Have a good night Friends. Thanks again for your advice and all the Best.

Sincerely

Ghulam