When you see yourself stuck in a mountain of debt, you might question how much you need your credit cards. Thinking about negating them so you cannot accumulate more debt might seem like a good idea but is this really the right thing to do?
Is losing your credit cards beneficial to your long-term finances? Getting rid of your credit cards serves one good purchase: you can’t use them, and therefore, you can’t increase your amount of debt. However, learning how to control and better manage your money has benefits that will serve you better in the long-run.
Here are 5 other demerits of getting rid of your credit cards:
Just because your cards are in the trash doesn’t mean that your debt is. You still have to pay off your debt, no matter how many cards you cut up. Not to mention, the history of your cards will stay on your credit report for up to six years even if you pay it off and the account is closed.
Closing a credit card with a balance eliminates the remaining credit available on the card and makes the account appear to be maxed out. If potential lenders look at your credit report and see that you have no credit available on that account, it could raise a red flag for them.
If the card you’re closing has a good history of paying on time, you’re essentially getting rid of something that boosts your credit score.
Dropping a credit card from your account could make your list of credit less diverse. Credit diversity is extremely important because it demonstrates how you can handle all types of credit, and it could boost your credit score.
Chipping away your credit card makes a lot of things more difficult: booking travel, shopping online, managing your expenses in between paydays, etc.
If you’re having a tough time getting your spending under control, or if you have someone on your account who can’t stop spending, throwing out your credit cards might be your only option. However, carrying your debt onto a low-interest balance transfer card is a move that could help you get a handle on paying back owed money.