(FinancialHealth.net) – Between paying down debt and boosting your credit score, balancing finances can be a challenge. The ultimate goal is to have enough buying power to make major purchases at a stellar interest rate. If you’ve tried and tried but your credit rating is stuck, take a closer look. Have an unused credit card? That may be the culprit! Sometimes the card fees add costly charges. Find out if canceling that unused credit card is beneficial or not.
Are There Fees Associated with the Card?
When deciding to close a credit card you never use, consider the annual fees. These can range from a few dollars to several hundred each year. While you may never use the card, you’re still charged the fee if the account remains open. If you’ve had the card for a long period of time, call the company and ask about options. Sometimes they will waive the annual fee if you’re an established customer.
Look Closely at Card Terms
Check the financial terms. What is the interest rate or finance charge? The lower the better. Keep in mind that some cards offer a 0% finance charge for an introductory period of time. Once that expires, rates go up and so does the monthly payment. Paying off the balance and canceling the card before the rate increases is a good way to save money.
Maintaining a High Balance Card
Pay off high balance credit cards but leave the line of credit open. Avoid canceling if you can. Doing so can boost your credit rating. Even if you no longer use the card it will show up as an active account. As you lower the balance and keep the credit limit up, it will lower your credit utilization rate, which also helps your credit score.
Transferring the Balance to Another Card
If you have a maxed-out credit card in your wallet, check into transferring the balance to another card. This is beneficial if the APR is lower and the associated fees are minimal comparatively. While there may be a balance transfer fee, the lower rate and payment could be worthwhile over time as you pay off the debt.
Credit Score Impact Do you have a timely payment pattern associated with an unused card? If so, it’s still ok to close it, because it will list a positive credit history. On the other hand, if you’ve had some late payments or maxed out the credit limit, take time to improve your payment history with the card. Using the card again and showing consistent on-time payments will appear on your credit report long after the account closes.
Before shredding an unused credit card or calling and canceling, take everything into consideration. It may be worth it to keep using it if the rates are good or keep it without using it to help your utilization rate. On the other hand, if fees are steep, it’s time to cut your loss and move forward.
~Here’s to Your Financial Health!
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