Is it Time to Ditch Your Credit Card?October 7, 2010 - 8:33 am
If you’re in a relationship where the other person’s not treating you right, what’s the smart thing to do? Leave, right? Same thing goes for a credit card (usually). If you’re not getting the best treatment from your credit card’s terms and conditions, it may be time to call it quits.
You’re paying an annual fee but earning no rewards.
Annual fees only make sense in a few situations. Credit cards that provide rewards are known for having an annual fee. Secured credit cards and credit cards aimed at people with bad credit also have an annual fee. Finally, premier credit cards, which target the wealthiest consumers, usually have an annual fee, but they have rewards and other benefits to make up for the cost. If you don’t fall into one of those categories, you shouldn’t be paying the annual fee.
You’re paying a high interest rate, but qualify for a lower one.
If you have one credit card with a really high interest rate while your other credit cards have more reasonable rates, it may be time to let go of the high rate card. You don’t necessarily have to cancel the highest rate card. Instead, you can transfer the balance to a lower rate card or simply pay off the balance as quickly as possible.
Your credit limit’s been slashed to almost nothing.
A credit card with a paltry credit limit is not worth holding on to. It’s not like you could purchase much of anything if you wanted to. If you like the credit card, try asking for a credit limit increase. If your limit doesn’t budge, it’s time to move on. The only exception is when you’re just starting out or starting over with credit.
The subprime card you got when your credit was bad.
Once your credit starts improving, there’s no need to keep your bad credit credit card around, especially if you now qualify for better credit card deals. Get rid of that subprime credit card as soon as you can. The same thing goes for any secured credit card that doesn’t convert to an unsecured card after 12 to 18 months of timely payments. But, make sure you get accepted for a better credit card before you close either of these.
Rewards cards that limit or expire your rewards.
If you do your part making charges on your rewards card, your credit card issuer should let you spend them. There are too many rewards credit cards that don’t limit or expire your rewards to keep a card that looks for opportunities to take rewards from you. When your rewards card makes it difficult or impossible to take advantage of the rewards you’ve earned, move on to a better card.
Caution Closing Credit Cards
Be careful when you close a credit card account; it could have some impact on your credit score. This is usually true when you close a credit card that has a balance or you close one of only a few credit card accounts. But, you have to decide whether a temporary hit on your credit score is worth keeping a deadbeat credit card.