⭐ What are the benefits of cancelling a credit card when you’ve paid off its balance in full?

It’ll make you feel better, probably because you feel in control and are unable to be tempted back into spending more than you can afford.

It is better to keep unused credit cards with a zero balance open rather than cancel them because even unused credit cards will still report positive information to each of the credit bureaus each month. It is especially advantageous to keep a zero balance credit card open when the account does not have an annual fee.

⭐ Are there any potential downsides of cancelling a credit card?

If you cancel a credit card that you’ve had for a while could put you at a disadvantage, especially if you are looking to borrow money for a bigger purchase, or a mortgage.

⭐ How could cancelling a credit card affect your credit score?

Cancelling a card may increase your credit utilisation, which is the proportion you use of your available credit, and which could also lower your score, which is counter productive.

Also, consider this, and although it feels counter intuitive, but by cancelling a credit card could decrease your chances of getting credit. Managing a number of credit cards shows lenders that you can successfully manage multiple credit accounts, as they may see this as evidence that you’re a reliable borrower.

⭐ In what situations would it make sense for someone to keep a credit card open? And when might it be better to cancel?

If you were working on improving your credit score, maybe preparing to apply for a mortgage and you wanted your credit score to be as good as possible.

Understanding your credit score, what it is and how it could be improved is the first step to ensuring you are in the best possible position to apply for a mortgage.

The higher your credit score, the better your chances of being accepted for a mortgage, at the best rates.

My Recommendations

I always recommend that you should check your credit score each month as part of your personal financial health check. It’s important to keep a check on what the credit agencies are collecting and reporting, as they can get in wrong and it takes time to correct.

It would be good to cancel any extra credit cards, those ones you keep “just in case”. Keep the ones that have good benefits – such as you collect points, rewards, or give you travel insurance benefits whilst travelling abroad. Keep the ones that you can translate the “benefits” into something tangible that you would like. Remember keeping a credit card and using it for purchases also gives your consumer protection – so they have their benefits.

It would be better to cancel the ones that do not give you any tangible benefits and charge an annual fee.

Take the hint – If you can’t get all your cards in your wallet, or your apple pay looks like you’re playing credit card snap – maybe it’s time to get the scissors out and cull a few!

Remember cancelling the credit card doesn’t solve your issue with spending and credit, so whilst cancelling the credit card could solve your short term issue, it’s likely that you’ll get another one in the future and the cycle will continue.

Better would be to learn how to master your money and create new and better financial habits and learn how to live within your budget.

A Little Bit About Me…

Well, if you don’t know already – I’m a qualified and experienced Financial Coach and Financial Advisor.

It’s my job to help you work towards developing lasting positive change around your finances through support, motivation, accountability and setting a clear path towards becoming financially free. I can help you reduce financial overwhelm through a proven plan of action that is never critical or judgemental and gets great results.

I will empower you to get clarity, be confident and take control over your finances. To master your money and live the life you deserve!

You can book a Financial Chat by clicking this link:

📣 Fancy a Financial Chat?

Simply click below to schedule your consultation, and let’s get started on transforming your financial future!