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Never Close these 5 Types of Credit Cards!

March 6, 2018

There is no doubt that a credit card can benefit you in a multitude of ways. It can tide you over when you are temporarily short of funds. It can help you build your credit score. However, once in a while, credit cardholders feel inclined to close one or more cards for various reasons. Perhaps they are unhappy with the card issuer. Or maybe they just never use the card and don’t want to waste paper receiving statements. Nevertheless, before you snip a card in two, there is something you should know - in some cases, closing a credit card can do more harm than good. Here are some examples when it is actually detrimental to close a credit card account.

Case 1: Your credit card has a balance
Your credit utilization ratio is calculated by dividing the amount of credit used by the total available credit you have. And this metric makes up 30% of your credit score. So, when you close a card that has a balance, your available credit and credit limit for that card is reported as zero, but the outstanding balance is reported as it is. This leads to a spike in your credit utilization ratio, and it appears that the card has been maxed out. The final result is a negative impact on your credit score, which should be avoided.

Case 2: It is your only card with available credit
If all your other cards have been maxed out, and you have only one with available credit, you should keep it open. This is because closing that card will further increase your credit utilization ratio and ding your credit score.

Case 3: It is your only credit card
About 10% of your credit score is based on your credit mix. The credit mix is comprised of the various types of credit that you have. The greater the diversity of your credit profile, the higher your score. Hence, you should make sure that apart from a mortgage, car loan, and any personal loans, you also have a credit card in the mix.

Case 4: It is your oldest credit card account
The longer your credit history, the safer you appear to lenders. If you close your oldest credit card, you may not see an impact on your score immediately. However, with time, once that account drops off your report, you may witness a fall in your score.

Case 5: It is the card with the best terms
Some credit cards offer great rewards, no annual fees and very low- or zero-interest rates. In such cases, it is always better to keep the card open, as you will benefit from it in some way or the other.

For example, zero interest rate credit cards can be used to take out short-term loans. There are many consumers who use such cards for financing their business. Nevertheless, these cards may be hard to come by. For those individuals who are unable to get them, we have another option. At Fund&Grow, our team uses creative credit card financing to help individuals with good credit obtain $50,000 - $250,000 of unsecured credit at 0% interest. If you’re interested, call us at (800) 996-0270 and we will let you know whether we can help.


Ari Page Ari Page is the CEO of Fund&Grow. He resides in Spring Hill, Florida with his wife and two children.

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