3 Reasons Why You Shouldn’t Cancel All of Your Credit Cards

Are you thinking about your credit cards? Chances are pretty good that you’re thinking about the little plastic cards that you carry around with you everywhere. There’s nothing wrong with that at all. In fact, you really owe it to yourself to start thinking about the type of financial lifestyle you’re building, because that’s what really matters. If you’re not careful, you can end up spending a lot more money than you really wanted to spend. However, the solution might not be as clear cut as you might expect. What do we mean by this? Well, an explanation is in order.

You see, some people really feel that the only solution that makes sense is going to be to cancel all of their credit cards and live life as a cash only citizen. This sounds good in theory — yay, no more interest fees! No more fears of going over the limit and having to pay those pesky fees. Sounds like paradise, right?

Well, even paradise has a few storms. You see, if you end up going in this direction, you drop out of the credit system. Yes, we said it: what you’re actually doing is getting out of the credit system. This has a terrible effect on your credit rating: it will eventually disappear. If you don’t use credit, you don’t build credit. That’s why this scenario really isn’t as much of a tropical paradise as you might think it to be.

Now, we do have to admit that there are probably people out there that need to build credit a little more slowly than others, because they can’t trust themselves to watch their spending. However, that’s not something that’s true across the board. You have to know your spending habits in a way that will determine what type of credit cards you need to get. Even though there are other types of credit, card cards are hands down more flexible than the other credit products. They are also the stepping stone to bigger purchases.

When you step back and look at it from the right perspective, this actually makes a lot of sense. Why would a lender want to grant you credit for a house or a car without proof that you can actually handle that responsibility? Your credit as well as your ability to pay is taken into account when the approval process is made, and that’s a big deal.

You will want to make sure that you really do have things cemented down when it comes to your credit cards. If you have to cancel a credit card, you will want to make sure that it’s not one of your oldest ones — that will essentially chop off years from your credit score, leaving you to have to rebuild from scratch — not a good thing for your score at all!

There are some alternatives to closing your credit cards. If you have paid down a balance, you can actually have the account frozen so that you can’t use it until a certain date. Many credit card companies know that it can be easy for a card to be lost or stolen, which could cause unauthorized charges to occur. On the other hand, there is also the risk that you’ll break down and have a temporary lapse where retail therapy is on the horizon.

These are just suggestions — since everyone’s financial blueprint, lifestyle, and goals are all different, you will want to read this guide and then adapt the advice to fit your own unique situation — that’s all there is to it!