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Scott Bilker is the founder of DebtSmart.com and author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. Receive the 5-Year Loan Spreadsheet when you subscribe to his email newsletter. |
Hello,
My wife and I have a lot of credit cards. WE would like to cut them up so we don’t use them. Should we notify the companies first to cancel them? We are having trouble paying them. Thanks for your help.
Richie
Richie,
Thanks for writing!
I do not advocate the cutting up of one’s credit cards. I will answer your specific question, but first, let me explain why I take the position against cutting them up.
When you cut up your cards, you cut out your options. Credit cards, used properly, help protect you from deceptive merchants, provide cash for emergencies, and can deliver rewards and benefits.
Also, I’m guessing that you want to close your accounts in addition to cutting up the cards. However, closing your accounts can actually hurt your credit score! That’s because the credit reporting agencies use the length of time your account has been open in their calculation of your score.
But, to directly answer your question. If you do want to cut up your cards (and cancel your account), you should contact the bank, by phone, to let them know that you’re officially closing your account. They should send you a letter stating that your account is closed and that you are obligated to repay it under your current terms. If you don’t receive that letter, then you will need to write to your bank to ensure that the account is taken care of as you wish.
Keep in mind that if you’re late paying on these closed accounts, you could be subject to penalty rates. Some go as high as 30%! Be careful–if that happens, and you don’t have other open lines of credit which to transfer your balances, you could be trapped with high rates.
However, I’m really thinking that yours is not a credit card problem but a spending problem. You stated that you and your wife want to cut up the cards so you don’t use them. If you don’t want to use them, then simply file the cards in an old wallet in your drawer. Or carry one for emergencies only. That’s is the best way to go! Decide to have discipline, and trust yourself!
Best,
Scott
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