People will advise you to get credit cards all the time. But, has anyone really told you how to know when to cancel a credit card?
Having a credit card makes you feel like you can afford anything, as long as it is within your credit limit. However, using it irresponsibly can take a toll on your finances, especially if you aren’t paying the balances in full every cutoff.
While some credit cards charge only minimum interest rates, leaving behind balances can pile up, leaving you in debt. In case you are having a difficult time managing a credit card, here’s a guide to help you know when it’s time to cancel your glossy, plastic card.
Analyze Credit Card Usage
According to data, Americans have more than one credit card that they use for different transactions. More than the regular cards, charge cards are increasing in number—those that need to be paid in full every month.
The dependence on credit cards is increasing yearly, and as a consumer, being able to manage your finances means leaving no balances on these cards. If you are obviously having a hard time managing your cards, you can pick one that you think is best for your lifestyle. Let go of the rest so you can rest easy with bills and save more on your bank account.
When to Cancel a Credit Card
Canceling a credit card can leave an effect on your credit portfolio; therefore, you need to think it through. However, there are still good and solid reasons to cancel these cards completely. You should cancel a credit card if you notice the following.
You Are Paying High Fees
As you may know, not all credit cards are free. For elite or prestigious cards, expect to pay higher because you can enjoy exclusive perks. On average, the annual fees of cards can range from $50 to $500. If you feel that you aren’t getting the most out of the credit card, then you know it’s time to let go.
Some perks like earning miles points or paying low charges for foreign usage of the card is best if you travel frequently for a living. If not, then you are basically dumping all your money because of the expensive annual fee.
You Are Accumulating Debt
Another reason to end your relationship with a credit card is when you are accumulating debt over time. Aside from the balances, you also need to pay for the interest rate plus the late payment fee, in case you didn’t settle the amount on time.
If you aren’t careful, you might also encounter charges due to withdrawing cash from the card, exceeding the limit, or transferring balances from another card. Hence, it’s important to take note of your spending.
You Can’t Control Your Usage
This is one of the biggest problems of cardholders—the inability to control usage. If you are among those cardholders who cannot stop using your cards for all sorts of transactions, you need to back off and think about your habits. Remember to only use the card for purchases you can pay at the end of each month. If you aren’t consistent with your spending habits, it’s best to stay on cash.
Having a credit card provides a myriad of perks and convenience to cardholders. However, problems can arise if you are not careful with using the card. Reflect on your spending habits and think through whether it’s time to cancel your credit card.