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Blog Author Mona Weathers (monawea)

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Should You Keep Credit Cards Open To Keep Good Credit?

If you have read this blog at all you know that I hate credit cards. I really, really hate credit cards. If my husband and I would have learned about how much credit cards can ruin your life way back when we were newly weds things would be so much different for us now. Since we have decided not to borrow money anymore why should we keep credit cards open?

What I am about to say is not something I think Dave Ramsey would not agree with but I find it the only way I can keep from letting my existing credit card debt take over my life. Despite Dave Ramsey’s suggestion of canceling all credit cards we had decided to leave some open.

The reason we have decided to do this is because banks are cleaver and will find any way they can to get as much money from you as they can. Most credit cards now offer some great interest rates that are worth taking advantage of if the purpose is to transfer an existing balance. However if you happen to be late just one time that great interest rate will no longer exist. Not only will it not exist you will have to live with the high interests rates that are in the 20 percent range.

So what happens when your interest rate is now in the 20 percent range? Your payments jump to 2 to 3 times (maybe more) larger than they were before. Guess what happens when you go from a $200 a month payment to a $400 a month payment? If you are like us there is no way you can make the payment which means the cycle of becoming delinquent starts. The high payments making it impossible for you to pay the entire amount as well as the late fees and overdraft fees you can’t afford to pay either. If you become delinquent on the credit card then you risk getting bad credit scores as well.

At this point any hopes of snowballing your debt becomes almost an impossibility. You are struggling just to make the minimum payment that will never pay your debt down with the high interest rate. So what if you had kept a few credit cards open so that if this scenario where to happen you would be able to transfer your debt to lower interest rate card? If you keep your credit good then you are likely to get a good rate on another card or cards.

We are all human and from it’s possible that one month we forgot to make a payment on time. It’s unfortunate that credit card companies penalize you so heavily for just having one late payment but they do. They do this because they want to get as much money out of you as they can. We can keep from becoming delinquent or paying high interests rates just by playing them at there own game. If you can avoid it don’t let your credit scores get bad so that you can opt to transfer balances when needed.

Now, I am not a personal finance counselor or professional so take my advice with that understanding. I have just found this works for my family. I am not interested in paying the highest interests rates possible on my credit card debt so by keep a few cards open and maintaining good credit I am eliminating that potential.

Remember this is not a “keep credit cards in case of an emergency” situation. We have not used credit cards for purchases in two years and don’t plan on ever doing so. If you are using your credit cards for purchases then STOP. You don’t need credit cards anymore. You need to change the way you are handling your money. But if you keep a few cards open don’t hesitate to get the best interest rate possible so that you can pay that debt off.

October 25, 2007 | Filed Under Credit Card Use, Financial Advice, Financial Freedom Journey Pep Talk

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One Response to “Should You Keep Credit Cards Open To Keep Good Credit?”

www.topcreditcardsadvice.info » Should You Keep Credit Cards Open To Keep Good Credit? on October 25th, 2007

[...] Mona created an interesting post today on Should You Keep Credit Cards Open To Keep Good Credit?.Here’s a short outline:If you have read this blog at all you know that I hate credit cards. I really, really hate credit cards. If my husband and I would have learned about how much credit cards can ruin your life way back when we were newly weds things would … [...]

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