Debtdates or How’s That Debt Doing?

There’s been some good news and bad news in terms of my credit card problems.

My VISA is currently maxed out. My funds are slim and I was only able to pay the minimum payment on the card. After I paid my card, the interest came out: It was $3 more than the minimum payment, setting me back slightly further. Or, at the very least, it put me right back where I started–with a maxed out credit card.

So that’s the bad news.

The good news is that I was able to increase the limit on my 6.99% credit card and I’ve put in a request to transfer the balance from the higher interest rate card to the lower interest rate card. Woo-hoo!

That means I’ll pay less interest on the balance as I pay it down. I finally feel like I have control over that debtload.

I’m debating whether I should cancel the card outright or keep it as a sign of good debt. I think I will close the account. I now have another card that has the same limit, meaning I have plenty of credit (once the debt is paid off). I won’t use this card again. Some financial advisers like Gail Vaz Oxdale suggest that you shouldn’t own a card at the same bank as your bank account because they can take money out of your account without asking your permission (from It’s Your Money). While I’m not at a point where they’d even begin threatening to do that to me, I’m not too keen on giving them the option anyway. Like I said, I already have a card now that has the same limit (but with a better interest rate) and the “points” that I earn on the card are kind of minor. I plan on cashing the remaining points balance into a $100 gift card to Best Buy or Future Shop. It will go towards the purchase of a new laptop (aka my workhorse).

The other reason I’d like to cancel the card is because it may hinder me in the future from getting approved for a mortgage or car loan because I’ve got too much credit. Banks and lenders see too much credit availability as a liability because I may be tempted to use all of that credit and then not pay it back. While I would never do that, because the threat is there, it may be a better option for me to just close the credit card now before I make any plans to do some borrowing in the future. I really don’t need that card any longer.

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2 thoughts on “Debtdates or How’s That Debt Doing?

  1. Hi Olga, before you cancel the card, I would strongly reconsider. While I’ve never done that, from what I’ve read, it can be devastating to your credit score (if you’re concerned about that). The credit bureaus give a pretty big ding for any credit line cancellation. It’d be best to just cut up the card once you’ve paid it off.

    • Thanks for the advice, Justin. I do believe I need to have a healthy credit score, but it’s not something that I’m too worried about right now as I have no imminent plans to open a loan account or mortgage. Then again, you may be right. My boyfriend and I have been discussing getting a car so maybe this IS something that’s on the horizon for me. If closing the account will do more damage than having this amount of credit available to me, maybe it’s more beneficial to keep it and just not use it. I’ll have to think about it some more. Thanks!

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