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So, Sunday morning I was hustling around and trying to get as much done before having to head out to church, taking advantage of my wife and kids being gone (they slept over at grandma’s house). It’s amazing the things you can get done when you are distraction free lol.
Anyways, we have been going through Financial Peace University, and last week, we had the “Dumping Debt” lesson. Now, Jenni and I have been debt free, other than our house, since June 2013. But, for some reason, I couldn’t bring myself to actually close our two credit card accounts because I was still under the mindset that we “needed” them until we actually built up our 6 month fully funded emergency fund. I felt secure knowing that I had access to $10,000 plus, even if it came with a 13.9% interest rate (or whatever the rate was). So, when we finally hit our goal earlier this year of having our 6 month fully funded emergency fund, it was a real reality check for us.
It’s not like we actually worried about the credit cards much. In fact, my cards were down in my office buried in my normal pile of paperwork and the card Jenni was carrying wasn’t even the newest card. We ended up cutting up the old card during our FPU class along with one other person. Then, this past Sunday, we actually cut up the other 3 (my 2 and Jenni’s new card). The funny part about it was that the cards were still attached to the paper they came mailed in. We hadn’t even activated them.
Now, I know that just by cutting up the cards doesn’t actually close out the account. So, I decided to call both companies (Chase and American Express) to close the accounts. I was expecting some drawn out, retention issue when I went to call and cancel. But, to my surprise, they were very easy to close. They mainly just had me verify normal information for my identity and then asked why I wanted to cancel. I just told them I didn’t use them anymore.
One thing I made sure to ask was for them to send me a mailing confirming that the account had indeed been closed. Both companies said that it could take 7-10 business days for the letter to arrive.
I don’t feel much different now that we don’t have the credit cards. I guess, even before we closed out the accounts, I didn’t really get my security from them. Maybe I was just more worried about making that phone call to cancel the cards? I’m not sure.
To be fair, we do still have a Kohl’s charge card, but we only use it to get the discount the rare times that we actually do go shopping there. And when we do use it, we head right to the back of the store and make a payment that same day so that it really doesn’t even show up. It’s kind of stupid that they force you to use their card to get the discount, but that’s just the way it is. For now, we will hold on to it, but it is not safe from being chopped either.
I would encourage you to cut up and get rid of your credit cards as you are able to. What has your experience been with closing out different credit cards? Did you keep your cards after getting out of debt until you built your emergency fund? I want to hear your opinions!
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That’s wonderful! Since beginning my financial journey, I’ve paid off two small department store cards. I haven’t closed the accounts but I have cut the cards up. I’ve kept the cards open for credit purposes ( I guess). I imagine that once I get a 6 month emergency fund, I wouldn’t need the comfort of my credit cards either.
That’s great that you’ve made such progress on your journey! One thing that I always challenge people on when they say that they are keeping their cards open for “credit purposes” is I always ask what they need credit for. If you already are in a house, you should be in good shape. I guess I just wonder the reasoning behind it, but you are doing great! Thanks for stopping by and taking the time to read and comment!
Steven Goodwin recently posted…We Finally Closed Our Credit Card Accounts
Glad to hear that you are debt free and could cut up cards and close accounts. I’m working on my debt now. One thing I did was isolate our card use…took away my wife’s cards and now only use one card for me, which has recurring costs on it and earns hotel points.
I will only consider closing my accounts if it makes sense. For now, we have our debt stopped and changed habits with cards and I don’t want to negativity impact our credit so we can use it in the future for real estate investments.
Hi Brian, it didn’t really affect our credit as we are both well above 800 still. We still have the mortgage after all
I’ve had credit cards since I was 18 but fortunately I’m quite sensible/ boring so have automatic payments to pay them off in full each month. I have 1 reserved for holidays, because it has no ‘non sterling transaction fee’ so is cheaper to spend on credit card than exchange currency before we travel, and 1 that pays 0.5% cashback, which gets used for fuel and groceries (Might as well get paid for what we were buying anyway). It’s also useful for large purchases too, because in the UK (not sure if US is the same?) anything over £100 is protected, so if you ordered a washing machine and the company went bust before it got delivered, you could claim back the amount you paid from the credit card company. I do have one that doesn’t give me any benefit anymore and doesn’t get used, I should probably call the company to close it…
Sarah, thanks for stopping by. We have decided not to use credit cards anymore so that we don’t have to worry about it at all. For us, the rewards aren’t worth messing around with the credit card game and the rewards aren’t as great as if we just stick to our main accounts. It seems to just simplify and makes everything run nice and smooth for us.
As far as purchases being protected, I use my VISA debit card as credit all the time and have the exact same purchase protection as you. Sure, it may cause me a little headache as they are putting the money back in my account, but I have plenty of cash sitting in my other accounts to cover if something does happen.
Thanks for your opinion and I’m glad that you’ve found a system that works for you!
Steven Goodwin recently posted…This is your Monday morning reminder. – Motivational Monday
Please be aware that closing your credit card accounts can have an adverse effect on your FICO score. Your score is based on credit history and debt to credit ratio. Closing account will/can affect both of these.
Maarten recently posted…How I made 200K Doing Nothing
Yeah, my score took a short term small dip (less than 50 points) but has since recovered just fine. I’m not too worried about having a credit score as I’ve already secured my mortgage and tend to save up and pay for things. Thanks for stopping by!
Way to actually put action to a vision and do something God wants you to do with your life! So many people hear God talking to them, but then don’t make the sacrifices or take the pain to actually put vision to those dreams. Way to Go! It is alot harder to actually spend your cash once you get to know those “Benjamins” you carry around! Haha. Way to go!
Thanks Bill! It was a great feeling to finally get it done! And the best part is that we haven’t worried about it since!