Closing Credit Card Accounts?

To close or not to close – that is the question I am currently pondering with regards to the stack of credit cards I’ve accumulated over the years.  I’ve got those cards I first signed up for in college, the department store cards that gave me a ‘discount’, the obligatory accounts that I opened to ‘take advantage’ of a balance transfer, the Rewards  cards that I’ve accumulated airline miles, and a Diamond, Gold and Platinum just for good measure. 

Now even before deciding to pass my fiscally conservative – no credit card usage – budget earlier this year, I did not use the bulk of these cards (I’m currently carrying one large balance on my oldest card).  Rather, I opened these for short terms reasons (a more attractive interest rate), long-term reasons (by debt to available credit ratio) and sometimes for no reason at all. 

Ah … what a tangled web of debt we weave …

And while Dave Ramsey might have me sign up for a check card and sacrifice my plastic on a celebratory debt funeral pyre; Suze Orman might have me waking up with night sweats, pondering every fluctuation in my precious FICO score.  I’d like to find a middle ground that takes into account the concerns of both of these schools of thought without having to operate at either extreme. 

In doing so, I found a very useful article on Bankrate that answered many of the questions I had:

Will closing inactive cards hurt?

Is there ever a reason to close a card?

Does it matter if you or the card issuer closes the account?

Is there any difference in cancelling a store card versus a major credit card?

If a store card is your oldest card and you cancel it, will it hurt you more?

The article sheds some light on these questions and exposes some of the myths that exist surrounding the closing of credit cards (at least as they relate to your credit score).   And as a guy getting out of debt, that’s my primary concern at this point since I’m no longer actively addicted to plastic. 

And even more useful feature of the article is that these questions are actually answered by an actual FICO employee. 

My final decision after reading this article – stand pat.  I’m certainly not going to close my oldest accounts (that would be most detrimental to my credit score).  And keeping my existing accounts doesn’t seem to have a measureable negative effect. 

While this was a rather anticlimactic process for me (I was actually looking forward to cutting up a few cards as some small token of victory over my long-standing addiction to plastic), I think it’s the right one.  Of bigger concern to me now is my debt mix (I don’t have a mortgage or auto loan) and that one large remaining balance on my Citibank card. 

Here’s a link to the full article – hope you find it useful! 

http://www.bankrate.com/finance/credit-cards/closing-credit-card-dings-credit-score-1.aspx

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