Last night, I pulled my credit report and found that for some reason I still have a bunch of credit cards still open. I only use a couple with any regularity, and yet I have at least 19 active accounts.
Why so many? A few years ago, I had a pretty decent credit score despite a fairly large amount of debt. Before the financial meltdown, it was easy to get 0% balance transfer offers with no transfer fees. I opened nearly all of these cards to shift around the various balances I had as I paid them down. In addition, I participated in some arbitrage games (getting cash from the 0% offers and sticking it into bank accounts to earn interest, which was 3-4% at the time). I also opened a few solely for the premium offers — points, cash, etc. I was very dedicated to getting as much as I could from credit card offers; I made up spreadsheets and everything.
(I even got to the point where I had about fifteen cards that I used monthly to make $1-2 charges on. A number of issuers, including Chase and Discover, would automatically cancel the payments if your balance was below a certain threshold.)
Then, everything went to crap. Fortunately, I had paid of nearly all of my debt before interest rates started rising. But I was still left with a bunch of open credit cards.
I didn't want to close them right away because closing credit card accounts can negatively affect your credit score in a couple ways:
- It reduces your overall credit line, which increases your percentage of credit utilization (and thus makes it look like you are borrowing more, even though all you're doing is reducing the amount you can borrow)
- It limits the length of your average account history.
So, what's changed now to make me want to close them? Well, for one thing, keeping them is ruining my shredder. I keep getting balance transfer offers and access checks, which I have to slice up, and that's annoying. Worse, though, is that every open account presents an increased risk for fraud or identity theft.
Last night I closed eight of the credit card accounts I still had open. I was going to close three others, but then Citi offered me some bonus ThankYou points on each of them. All I have to do is keep them open until the points post in two billing cycles.
Some habits die hard....