Ditching The Credit Cards

Since moving recently, we’ve been working on getting our address updated every time we get a piece of forwarded mail. It came to the credit cards and we decided, “why update the address, let’s just close them!”

I know, I know, many of you are probably thinking closing your credit card accounts will hurt your credit score, but here is why we made the choice to ditch the plastic:

  • We’ve been using a debit card for the past 2 years that is tied to an interest bearing checking account earning 2% interest at Heartland Credit Union. It beats credit card rewards.
  • We spend less knowing we are using actual cash.
  • The service from the credit card companies sucks. When I called Citi to cancel our card I spent 37 minutes on the phone (28 minutes of that was on hold) and I got transferred 4 times.
  • We have an emergency fund and don’t need to rely on credit.
  • We wanted to simplify our accounting by reducing the number of accounts we need to track.
  • The rewards aren’t worth the hassles.
  • Fewer accounts means a lower chance of identity theft.

We use to be people who worked hard to maintain a high credit score. Doing real estate investment and carrying multiple mortgages on multiple properties, a credit score was extremely important to purchase the next property. Although, we have come to realize, Dave Ramsey was right; a credit score really is a “I love debt score”. You borrow and pay back; just to get a good enough score to borrow more and pay it back more with interest.  Wash, rinse, repeat.

We’ve reached a point in our lives where we are happy and content where we are. We don’t plan to move for at least 20 years. We’ve steered our real estate investments into a more conservative approach, we’ve got an emergency fund and IRA’s if we really get in trouble, and we have simplified the ways we handle our finances. So, at this point, I’d be perfectly happy if we never borrow another penny. Ever again.

I know closing long standing credit card accounts will hurt our currently phenomenal credit scores due even though there hasn’t been a balance in years. …but go ahead (not so) Fair Isaac, ding our credit score for cutting up our credit cards and closing our accounts. Even if our credit gets a 100 point hit (I don’t think it will be that much), dropping to a 710 credit score won’t bother me a bit.

I will admit, I kept one card open just for a backup if we are traveling. I’ve had instances when on a motorcycle road trip where my card got locked out due to gas stops every couple of hours in multiple states across the country. So, I figure one backup card probably isn’t a bad idea.

Also for those of you that currently use credit cards and looking to buy a house soon, don’t go closing your accounts just yet. If you are planning to get a mortgage in the next few years and you have been a user of credit, you are better off just keeping the credit card account open but not using it. My credit score did stay over 810 without using a credit card for 2+ years. Although, if you close long stand accounts your score will drop and it could negatively affect your mortgage terms. Amount owed vs credit available, and a length of account history are a large part of what makes up your credit score.

For those of you that haven’t started using credit of any sort but want to get a mortgage someday, you can get a mortgage with no credit score (just not a bad credit score). So, don’t go opening credit cards just to build a credit score.

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