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No. of Recommendations: 3
I have some cards that I rarely but keep around because they serve specific purpose - financing of auto repairs, hardware purchases or even an HVAC system. To keep the issuer off my back, at least once a year or every six months, I charge something small and convenient, then pay it off. Doesn't get me into trouble buying something I don't need and keeps the credit card companies off my back.

Fuskie
Who is now trying to decide if saving $120/yr is worth adding another special-purpose credit card...

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Are the two active credit cards from the same issuer? Keeping cards from different issuers is useful when things go wrong. I believe that given time all accounts will have issues. It is nice to have a backup while working things out.

Also, how much of your credit limit is on the unused cards. The loss of credit limit might slightly hurt your credit score.
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No. of Recommendations: 4
Should I terminate this card or buy something to keep it open?

As with nearly everything having to do with credit, the answer is "it depends".

If you're worried mostly about your score, here are the potential impacts:

If it's a large part of your available credit (25% or more), closure could impact your credit score by increasing your utilization.

If it's one of your newer accounts, closing it could actually increase the average age of your active accounts, which can be a positive. If it's one of your older accounts, the inverse could be true.

You might want to use a score simulator to see what it says will happen to your score. I think that www.creditkarma.com and www.bankrate.com have credit score simulators.

However, as vkg indicated, if both of your 'main' cards are from the same issuer, it can be good to have a card from a different issuer, as there have been times when all the cards from a particular issuer have had problems.

AJ
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No. of Recommendations: 2
Each of the cards (including the ones I use) are from different issuers. Total 4 cards from 4 issuers.

I am mostly concerned that if I allow a card to lapse my credit score might decrease which could potentially increase the cost of my car and homeowner's insurance. Is that a realistic concern?
Thanks,
Wendy
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No. of Recommendations: 2
I inadvertently let one of my cards lapse for the same reason because I wasn't paying attention to the time frame. According to Credit Karma this had no affect on my 800+ credit score. It reduced my available credit by about 10%.
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No. of Recommendations: 2
Wendy,

AJ485 posted excellent advice on the post before your latest.

I will add some things to think about and I am not asking for you to post a reply.

Has something changed in your financial picture in the past year. Anything like a job loss, furlough, retirement. Have direct deposits to an account at one of these institutions stopped?
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Are all 4 cards have the same age? Is the one that might be closing your oldest card?
Is the available credit limit near the same on all cards? Is the card in question a higher limit card?

If yes to the 2 last questions I wouldn’t close the card.

Banks are looking closer at what liabilities they have out there. They are all tightening their credit across the board for all but the least risk customers.

I rotate card usage every few months. Just to keep them showing activity. I have 2 favorite cards that I favor. My oldest card is opened late 70’s. My newest is 2019. The oldest also is my highest available balance. I would not ever close this card.

Hope this helps your decision.
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No. of Recommendations: 3
Wendy, one more thing. This Bank’s decision could have nothing to do with your history, your credit score or habits . It could be that the bank is struggling with it’s cash on hand Capitalization Requirements that Federal Regulators are looking at. To meet the Fed Requirements they need to reduce their open liabilities. They do this by closing unused accounts to improve their numbers at the Fed.

They review their open liabilities and close open accounts to counterbalance accounts that they had to write off as bad debt.
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No. of Recommendations: 2
Each of the cards (including the ones I use) are from different issuers. Total 4 cards from 4 issuers.

I am mostly concerned that if I allow a card to lapse my credit score might decrease which could potentially increase the cost of my car and homeowner's insurance. Is that a realistic concern?
Thanks,
Wendy


It is not an unrealistic concern but closing the account is unlikely to cause a significant drop in your score.

The considerations are:
1.) Length of history on this card compared to the cards you are keeping
2.) The monthly balance reported on the other cards
Even if you pay off the card each month, the balance is reported at a time during the month that rarely coincides with when you make a payment.

The open card contributes to decreasing the percentage of your over all credit usage. If your average reported usage on your other is low then the impact for this account is minimal.

I had a credit card closed by issuer. Similar situation, I had 4 cards and have been using three.
It didn't have as long a history as my active cards and I rarely have more than 15% credit available usage on any card reported. Closing the account didn't make any noticeable change in my FICO score. What did cause a 20+ point drop that took several months to recover was the payment for a cruise. It was paid off before the due date but was included in the reported balance.
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No. of Recommendations: 1
If the concern is that the card being canceled will reduce your overall credit available, thereby increasing your utilization percentage (even with the same spending), and reducing your credit score as a result, then options are:
- keep card open,
- pay off cards more than once per month (some cards don’t allow this, supposedly, but I’ve never had a problem, and typically pay off any large purchase as soon as the charges appear), or
- don’t worry about it, as whatever hit your credit takes will most likely be minimal.
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No. of Recommendations: 3
I have some cards that I rarely but keep around because they serve specific purpose - financing of auto repairs, hardware purchases or even an HVAC system. To keep the issuer off my back, at least once a year or every six months, I charge something small and convenient, then pay it off. Doesn't get me into trouble buying something I don't need and keeps the credit card companies off my back.

Fuskie
Who is now trying to decide if saving $120/yr is worth adding another special-purpose credit card...

-----
Premium Home Fool: Ask me a Foolish Question, I'll give you a Foolish Response!
Ticker Guide: The Walt Disney Company (DIS), Intuit (INTU), Live Nation (LYV), CME Group (CME), MongoDB (MDB), Trip Advisor (TRIP), Vivendi SA (VIVHY), Mimecast (MIME), Hain Celestial (HAIN), Royce Micro Capital Trust (RMT)
Disclaimer: This post is non-professional and should not be construed as direct, individual or accurate advice
Disassociation: The views and statements of this post are Fuskie's and are not intended to represent those of The Motley Fool or any other sane body
Disclosure: May own shares of some, many or all of the companies mentioned in this post (tinyurl.com/FuskieDisclosure)
Fool Code of Conduct: https://www.fool.com/legal/the-motley-fools-rules.aspx#Condu...
Invitation: You are invited to interactively watch Motley Fool Live online television: https://livechat.fool.com
Call to Action: If you like this or any other post, Rec it. Better yet, reply to it. Even better, start your own thread. This is YOUR TMF Community!
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