Money question....please help!

[Tree House Academy]

Okay...a bit of background.

 

I am a homemaker. DH brings home the bacon. I have a credit card with a limit of 20K and a balance around 4K. My plan was to cancel this card, pay it off in the next 2-3 months, and be done with credit cards for the rest of my life!

 

However, I am rethinking the decision. First off, the banks are trying their hardest to keep good paying customers with high credit scores (me) and they will tell you about anything right now. My card company told me that if I cancel a credit card before paying the balance to $0, it will negatively affect my credit score. Does anyone know if this is true???

 

Also, is it "smart" to have this one credit card in my name? Most things are in both my and dh's names, so do I "need" this is my name for some reason??? Or is it best to destroy all temptation and pay cash???

 

Advice, greatly appreciated. :)

[athena1277]

It's always good to have a little credit that is not tied to your husband. Hopefully he will live to be a very old man, but if something should happen to him, it will help you a lot to have something in your name.

 

I would pay it off, then just use it once in a while on small purchases and pay it off when the bill comes. That shows that you can pay your bill on time, keeping your credit score good.

 

Of course if you are the type that is too tempted to buy things, you may need to keep it somewhere at home (so you can't use it).

[newlifemom]

Why not pay it off and not use it. Keep it for an occasional purchase, but keep somewhere safe and hard to get to. KWIM? Personally I would l.o.v.e. to be out of debt. I don't care what my credit rating said.

[Tree House Academy]

Yeah...you and me both (love to be out of the debt). 4K is chump change when you look at what we REALLY owe in the grand scheme of things... We have a LOT of income...but we have a LOT of debt...so really, we'd probably do better making 30K a year with a family of 4 and no debt than we are doing now. :(

[Plucky]

Keep it. Freeze it in a block of ice in the freezer and don't use it. You can even cut it up and keep the acct. open.

[fshinkevich]

I agree - pay off the account but do not close it. It can damage your credit score, plus I think it is wise to have a card in just your name, you don't know when kind of emergency might require it.

[Tree House Academy]

I just shredded it! :) YAY!!! Now, to go and erase the number from my paypal acct and my other online accts that have it saved. It is just TOO EASY to use it when all you have to do is click!

[Jenny in Florida]

As I understand it, a portion of your credit rating is based on what percentage of your available credit you are using. Thus, having significantly more credit available than you actually have balance is considered a big plus. So, Clark Howard would tell you to pay off the card but keep it and use it at least twice a year to keep it active. I heard him the other day suggest to someone that they use their cards twice on something as small as a hamburger and pay off the balance immediately each time.

 

And, yes, I would think it is probably a good idea to have one card in your own name.

[rafiki]

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[Brigitte]

I have not read the other responses, so please excuse me if this is a repeat...

 

DO NOT CANCEL your card. Doing so will have a negative impact on your credit. Cut it up, put it in the safe deposit box, hide it from yourself, but do not close the account.

[texascamps]

As it was explained to me..... A credit account that has been in use for a long time and has been used well gives you positive credit. It establishes a credit history. New credit does not have a history so if you only keep new accounts then you don't have that longstanding history that gives you the points. So if you have an account opened in 85 and one in 2001 and you close the one from 85, then your credit history goes back to 2001. Plus you reduce the amount of what they call Available Credit.

 

I was told to keep the account and not use it. So, between my husband and myself we have excellent credit because I have a credit history that dates back to my first card in college and my husbands first card in college. Every few years when they send me a new card, I cut it up. Only if they send me one of those 0% no fee offers do I use them to pay off a car or something. Apparently canceling new credit does not affect your credit rating like canceling old credit.

 

If you do a google search for "Understanding FICO" or "Understanding Credit" there are many resources that really explain the hows and whys of credit...Mortgage lenders are also a great source for information on how to improve your credit.

[Confuzzled]

I guess I'm going to be the odd man out here. We're followers of Dave Ramsey and have decided that all credit cards must go. We are closing all accounts as we pay them off. Dave says if you play with snakes you're going to get bit.

[JoyfulMama]

We never pay interest, but we do get a % cash reward for the total dollar amount charged over the year through our federal credit union. Think about it, groceries, gas, clothing, education, holidays, etc. over the course of a year, that is a good chunk of change.

 

This is what we do too. With the bonus money I usually buy gift cards for places I normally shop. The money I buy it with it free, since it is bonus money, plus in purchasing a gift card, I usually get additional bonus money ($50 card for $40 bonus money, so $50 free dollars for doing nothing but our normal thing!).

Has been great bonus money for Christmas gifts and clothing shopping!

[Mommyof4ks]

I agree with keeping the card and just not using it or cut it up if the temptation is too great. We have a couple of cards, but we only use them for our regular purchases and pay them off every two weeks. We are not going to use them for the next few months, because we are going to be purchasing a new home. The credit cards help get us a better rate assuming we don't have an overdue balance at the time that the lender checks our credit especially since we have cards from 1998 with no balance on them. If you have no current loans or credit cards your credit score goes down, and it may be harder to get a loan or the interest rate may be higher if you go to get one.

[Tree House Academy]

All good to know! I have had this card for 4 years and, unfortunately, it has been paid down from a high balance more than I would like to admit. However, I have never been late for a payment. As a matter of fact, they just KEEP raising my available credit. Between it and the other credit card I had (I did cancel it as it was very new and didn't hurt me at all), I had almost enough credit to buy a house! My ex-FIL had a cc with UNLIMITED available credit. Now *that* is nice. LOL I couldn't control myself one little bit...but still...

[lighthouseacademy]

It has both of our names on it, we use it like a debit.

It actually matters whose name is the primary account holder, even if you are joint on the account. A few years back, we had 2 credit card accounts open because we switched to a reward account but kept the other one open. Both were in my name primarily. Dh had the job and had 1 utility primarily in his name. When we went to buy a car and our credit was pulled, my credit was slightly higher (not by much) because I was the primary. The point being, even if you have no job, you do need to maintain credit. If you ever had a situation where you lost your dh and had to move and start up utilities, you need the good credit to avoid having to pay large deposits (which the utilty gets to keep for a year and earn interest on) or to get an apartment etc. Hopefully nothing like that will ever happen, but it is a good idea to maintain a good credit score (and I love what David Ramsey says about staying out of debt, planning for the future, etc, but I don't agree with him that credit scores don't matter if you are debt free and keep a budget etc. You never know. To me, if you decide to never use a cc, then for sure cut it up and don't use it at all. We have 2 accounts (one was an old home-based business card and the other was one from college, that we haven't used in 5-8 years but we leave open and shred the cards- our credit scores are almost as high as you can possibly get and we don't have a bunch of debt).

Edited December 18, 2008 by lighthouseacademy

[Nestof3]

From what you described, you have a large income but lots of debt, and you personally have a $4,000 credit card debt, so I would say it would be safest to get rid of your credit card. Since you mentioned $4,000 is small compared to how much debt you guys have, I would say the last thing you need to be concerned about is your credit score because you shouldn't be looking to use credit anytime soon. KWIM?

 

Since we are not in the market for a new house, and we have a new van, I don't really care what our credit score is, so we closed all of our credit card accounts except for my husband's one and my one. These are used for online purchases.

 

Oh, and for what it's worth, they raise your limit to benefit them, not you. The higher they raise the limit, the more debt a person is likely to incur. You can always ask credit card companies to lower the available credit to $500 instead.

[rafiki]

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[Scarlett]

My 2 cents with the info you provided...cancel it and dont' worry about your score too much. If you have trouble with debt, you need to remove the temptation as much as possible. Shredding it was a good start though. :)

 

This thread reminded me of something I found funny. I quit my job and became a SAHM with no income. I opened an account in my own name in a different bank about 4 years later. It was a small amount of money...I was just trying to start a savings account. Anyway, the bank lady says, 'oh you pre-qualify for a credit card with us! So she gives me this card with a $5000 limit on it. I told the lady...you know I don't even have a job right? :)

 

It sat in my desk drawer for a couple of years---and expired without ever being used. One day I needed to use it and realized it was expired....then got concerned that they had sent a new one that someone stole...so I called the cc company and they sent me another one and I used it for an Amazon purchase just to keep it active. One week after using it, I got a letter from them saying, 'Congratulations! We have increased your limit to $7500.' :glare: I guess they figured someone was paying my bills even if I was unemployed...

 

And then the time we bought a new car and my credit score (with no job) was 820 and dh's was 810...hee hee....that was funny. I always wondered how that could be.

 

Anyway, I think credit can be dangerous. I just mostly agree with Dave Ramsey to get rid of them all.

[Alison in KY]

Another Ramsey fan here. I hate to say it sometimes, because those little bonus 10% off if you sign up, etc are so tempting, but my husband never wants us to have a credit card again. I'd say it is just to tempting to own one for alot of people, including myself...we are in an owe society and to actually own things is nearly unheard of. I never knew people borrowed on things other than houses and auto's until recently when a friend and ex-stockbroker was talking about people getting loans for furniture, vacations,etc. It was surprising.

 

I must admit, one common thing I see with many local homeschoolers near me is frugality and the use of cash only. I guess it's some old time tried and true values. I'm not saying people who use credit cards are wrong...but it's just tempting. We have an emergency fund and debit cards. You can use the debit card just like a credit card, for online purchases and anything else, except it's directly taken from your account...so no 30 day wait for the bill.

 

Good luck, hope you get your debt paid off soon. I remember the day we traded in my new 2000 Eddie Bauer Expedition (loved that car!) for a 1996 white with a red stripe down the middle Ford Windstar. It had been used to deliver donuts :). Anyway, I didnt' like that van, but that feeling of being debt free was incredible and put my soul at peace. A couple years ago I finally got to move up to a 2001 Windstar, oh how nice it was to have both doors to slide open. I felt like a queen when we got it.

 

We don't do things perfectly, and I certainly get envious of others sometimes, but I wouldn't trade our debt free living for a bigger house or large car payment any day. Life's too short.

 

Alison in KY

[Nestof3]

I read about this free, reputable site where you can see your credit score without it affecting your credit score. I found out about it at the Clark Howard website.

 

https://www.quizzle.com/