Flip on the television and on any channel during any day you’ll see advertisements promising to help you get out of credit card debt. There is, however, a missing suffix to all of their ads, which is what to do with those credit cards once the debt has been paid off. Should you close them or should you leave them open?
Here are several reasons why you should never close your credit cards, ever.
1. You will lose the benefit of the available credit limit in your credit scores.
That’s right, the minute your credit reports are updated to show the account as being “closed,” your credit scores are likely to change for the worse. The amount of damage will depend, in part, on how much of a credit limit you’ve lost and how much credit card debt you are carrying on other, still open, cards.
2. You will lose access to the capital.
This used to be an afterthought when you closed a credit card account. The reason is because credit cards were so readily available that you could easily replace one card with another and not skip a beat. The problem is nowadays it’s much more difficult for the average or below average credit risk to open a credit card with any meaningful credit limit.
3. You never know when you’re going to need the card.
What you don’t know is, frankly, what you don’t know. You don’t know if you’re going to lose your job or lose your health insurance. And while depending on credit cards to survive is a finite strategy that normally has a very bad ending, sometimes you
have to do what you have to do to survive. I call this your financial Alamo.
The alternative is to simply tell all of you to avoid credit cards altogether, which is lazy advice. It also assumes that the cards in your current inventory do not have annual fees and even if they do, you still realize a fair value in exchange for the fee.
So leave ‘em open folks. Absence makes the heart grow fonder.