You don't need to feel trapped by your credit cards.
Money & Finances: Budget
Money & Finances: Credit Cards
Money & Finances: How-To
Money & Finances: Tips & Tricks
If you don't like your credit card or the bank that issues it, you have a wide range of options. Some may feel better than others, but using them may end up hurting your credit score and your ability to get new credit. Here are some steps you can take if you don't like your credit card and things to think about before doing them.
Cutting It Up
If you hate your credit card or your bank, the best feel good option might be sticking your cards in the shredder or cutting them up with a pair of scissors. If you do this, you should also take them time to call your bank to tell them how much you hate them and to close your account. If not, you may get billed for a fraudulent charge, never realize it, and suddenly have late payments that you can't dispute on your credit report.
Before canceling a card, you should also consider the effect on your credit score. Closed accounts generally stay on your credit report for 10 years, so you don't have to worry too much about your average account age as many people commonly believe. However, if the card you're closing makes up a large portion of your available credit, closing it could cause your utilization ratio to rise and your score to plummet.
Maxing It Out
Maxing a card out might seem like a good way to stick it to the bank if you have a 0% or very low interest offer. You might also decide to make a card the last card you pay if you're carrying balances on multiple cards and can't pay them all at once. This might hurt you more than it hurts the bank, though. In addition to the interest that you'll pay, maxing out a credit card can also hurt your credit score. Even if you have several other cards with a zero balance, even a single maxed out card can result in a penalty of up to 50 points.
Sticking It in the Freezer
If you don't want to cut up your credit card in case you might need it again, sticking it in the freezer or some other hard-to-reach place might seem like a good idea so the bank doesn't earn transaction fees in the meantime. In addition to the possibility of missing fraudulent transactions, this also might result in your account being unexpectedly closed. Some credit card issuers close accounts after as little as three months of no activity.
You may not care about staying with that bank, but you should care about the effect it will have on your ability to obtain credit in the future. In addition to possibly hurting your utilization ratio and account age, accounts closed by the issuer are notated differently on your credit report than accounts closed by the consumer. Some prospective lenders take this as a red flag that you've done something risky with your account and will be reluctant to approve your application.
Putting a Bill on Auto-Pay
It costs banks money to keep credit card accounts open, so the best thing to do might be to keep the account open. This is especially true if you need the card open to help your credit score. Simply set your lowest monthly bill to be paid with the card you don't like, and then set up an automatic payment to pay off the card each month. Just remember to monitor your statements for possible unauthorized transactions.
Changing to a New One
If you like your bank, but not the credit card you have, you can often request to change it to a different kind. For example, you can change a card with no rewards to a cash back card. The new card will keep the same history as the old card, so there will be no effect on your credit score. Some cards have different lending criteria, so you may not be approved for any card the bank has. In addition, some banks require a hard credit inquiry before making a switch, so ask about that if you're worried about the temporary drop in your credit score.
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