Cancel the Credit Cards?

**GirlBoyGirl** · 11-15-2011, 11:54 PM

Does DR advocate canceling the credit cards/having no credit cards at all? My sister-in-law was wondering if she should cancel hers. She doesn't carry a CC balance but spends it up too much during the month sometimes and wants to go all cash. So she put the card in an inconvenient place but she said it doesn't stop her from grabbing it before a Walmart run sometimes or, worse (her bigger problem): online shopping. So I think it would be better if she just cancelled all her cards but she likes the safety net for emergencies... Thoughts?

**pammy** · 11-16-2011, 09:05 AM

Does she have an emergency fund? If so, then I'd say yes!! Going all cash is awesome for showing you what you used to spend on impulse on cc's. Debit cards work just as well when buying online, but it hurts a little more to spend money that is really yours, so you tend to spend more carefully. jmo

Has she read his book yet??

I haven't owned a cc in... gees, almost 10 years. (had to think) Even then, it was my new dh's, that we soon got rid of. Have not regretted it one bit. Hasn't stopped us from buying big purchases (just call the bank ahead of time, if you want to use your debit card, to raise the limit that one day), or traveling. I'm not worried about emergencies since I have an emergency fund if something happens.

I know a lot of people that are pro-cc, they use them and pay them off every month. But why risk it? Why get caught in their trap? What if for some reason you couldn't pay it off (yes, emergencies WILL happen!!), and they do their thing that they do (they spend tons of money researching how to get you in their trap, one misstep and BAM!!). What is the risk if you paid for it in cash? Nothing. You had the cash, you made your purchase, the cc company doesn't profit from that.

Hehe, I could go on and on but I will stop. Highly recommend she read his book if she has not. Awesome that she wants to go cash!!

**Greebo** · 11-16-2011, 09:21 AM

The Ramsey commitment is to NEVER USE DEBT AGAIN. PERIOD.

So yes, cancelling the cards or at least closing them to new charges is the right move under the TMMO system. Keeping one "just in case" is giving yourself an out.

**khaski** · 11-16-2011, 11:53 AM

My opinion, for what it's worth, is that if she has a problem with self control as you describe, then all cards have to go. In another instance, if someone has the self control to only use the card a few times a year for small purchases that get paid off immediately, in order to keep the cards 'active' on their credit report, then keep one or two. I have kept mine open to contribute to our credit score simply because we plan to move in another 5 years, give or take, and we need the best credit score possible. Dave wouldn't agree, but as we will have a mortage on our new place our credit score matters to us. Someone as you describe should just close them and go to cash though!

**GirlBoyGirl** · 11-16-2011, 12:57 PM

Thanks everyone!

**Spirit Deer** · 11-17-2011, 12:40 PM

IMO, which I know many here don't agree with, a credit card can be a good thing. We use ours for everything we possibly can because we get cash back on it. Currently, we have about $1,000 sitting in our cash-back fund and the debate is going on about how to spend it. We're thinking a generator for emergencies might be a good idea.

However, we never have any trouble with controlling our spending and always pay it off when it's due, so we don't pay any interest, just a small annual fee for the cash-back program.

We've had our credit card for about 33 years and in that time have never overspent with it without careful thought and discussions and weighing of the pros and cons. Having the card allowed us to buy a house with it at a time when we needed to get our kids out of a bad neighborhood and had to move with no jobs, ensuring we could not get a mortgage. Without it, our hands would have been tied. It worked out great and I'd do it again in a heartbeat. It also allowed us to build on our lake property and avoid jumping through all kinds of impossible hoops from the bank which would have cost us a lot of extra money. (Construction loans can be difficult to get, whereas once the property is built, getting a new mortgage is a lot easier.) Having the card allowed us to charge building materials over the phone, when our contractors needed to pick up things 100 miles away.

If we couldn't refrain from impulse spending resulting in negative consequences, it would be a totally different story. In that case, it's probably better not to have it.

**frugalfranny** · 11-17-2011, 01:17 PM

Originally Posted by GirlBoyGirl

She doesn't carry a CC balance but spends it up too much during the month sometimes and wants to go all cash. So she put the card in an inconvenient place but she said it doesn't stop her from grabbing it before a Walmart run sometimes or, worse (her bigger problem): online shopping.

"No control" is her first clue that she should cancel it..........and
immediately prepare (financially) for an emergency.

**OOwl** · 11-17-2011, 01:52 PM

Although I was (and still am) concerned about it, I followed the DR advice and closed all my credit cards as I paid them off (when I was working the plan). While I certainly understand the advantage of having one (higher credit rating so you can qualify for reduced insurance premiums and so you can play the "cash back" game), I simply do not want the temptation, nor do I want to be in any sort of financial relationship with a bank I do not trust (how many horror stories have you heard about banks getting "confused" regarding one of their customer's accounts?). However, I recently married a man that has a credit card he uses very responsibly, and who has a history of sound financial behavior. He added me as an authorized user, and I guess I now benefit from that both by having a card I can use for online purchases (qualify for buyer protections) and a boost to my credit rating. I suppose DR would consider my situation as "cheating" on the plan, but I do have to temper what I learned at DR's knee with the beliefs of my husband. The card is paid to zero each billing cycle, so I suppose it's not so awful bad.

**pammy** · 11-18-2011, 07:35 AM

Just throwing this in there, as I recently pulled both mine and dh's credit scores, all 3. No cc's in the last 10 years... both of our average scores are 849-850. She doesn't need a cc for the score. If she's been on time with rent/mortgage, has ever had a student loan, or consumer debt that she is responsible with paying, she doesn't need a cc just for the score. I know I know... my opinion is not popular. But, look at the above.

**Ponderer** · 11-18-2011, 10:00 AM

Originally Posted by pammy

Just throwing this in there, as I recently pulled both mine and dh's credit scores, all 3. No cc's in the last 10 years... both of our average scores are 849-850. She doesn't need a cc for the score. If she's been on time with rent/mortgage, has ever had a student loan, or consumer debt that she is responsible with paying, she doesn't need a cc just for the score. I know I know... my opinion is not popular. But, look at the above.

I am so fearful of canceling my cards, but this should prove I am wrong. I have absolutely nothing negative on my report. I have previous auto loans, personal signature loans, etc. that have all been completed with no lates. I have my mortgage which was established in April 2009 and has had no problems. I cannot figure out why I tell myself that canceling my oldest card, which is only 2005, will keep my score down.

Whenever I run my report it says the reason my score is what it is is because of the debt to credit ratio and because my credit has not been established for a longer period of time. I only hear the long time part....because I have been in denial about the other.

My Visa from 05 will be paid off next month and I am going to say the heck with it....and cancel the darn thing!! (sorry for the hijack GirlBoyGirl!)

**Spirit Deer** · 11-18-2011, 11:57 AM

Other monthly bills like utility bills also contribute to credit scores, I think. So if those are paid on time that should be beneficial to your score.

Usually having a lot of credit will lower your score, even if you don't use it. At least that used to be true. A banker told me that long ago. If you have a large credit line, the thinking is that even if you don't charge it to the max, you could do so at any moment and then suddenly you have a bunch of unsecured debt, making you a bigger risk to a lender.

**mateosbaby** · 11-20-2011, 11:18 PM

I agree with Spirit Deer. A lot of people don't realize that your utility bills go on your credit report. They're there, so they count. You can always have a credit score just because of that, even if you have no other debts at all or open credit cards or anything.

**Greebo** · 11-21-2011, 08:25 AM

Originally Posted by mateosbaby

I agree with Spirit Deer. A lot of people don't realize that your utility bills go on your credit report.

They can. They don't necessarily do - although a collections account is much more likely to.

**mateosbaby** · 11-21-2011, 09:40 AM

Originally Posted by Greebo

They can. They don't necessarily do - although a collections account is much more likely to.

Is it by state or something then? I have lived in both WI and MN, and our utility bills have always been on there - electric & gas, and our phones/cell phones, cable/internet, I think our trash bill is even on there. I've never questioned it because they always have been on there, since I got my first apt in 2000.

**Greebo** · 11-21-2011, 09:43 AM

Originally Posted by mateosbaby

Is it by state or something then? I have lived in both WI and MN, and our utility bills have always been on there - electric & gas, and our phones/cell phones, cable/internet, I think our trash bill is even on there. I've never questioned it because they always have been on there, since I got my first apt in 2000.

It is the option of the creditor/account holder to submit credit information to the agencies, so it really depends on who you're dealing with.