A majority of the credit card holders all around the world feel that the best way to get out of insurmountable debts on their cards is by closing them right away. They don’t realize that this is actually a wrong decision and can impact your financial well being. It has an impact on your credit report and can affect the chances of your other loans getting approved. In order to avoid such costly mistakes it is important to know the types of credit cards that you should never consider closing.
First of all, any credit card that has an outstanding balance should never be closed. Thirty percent of your credit score is dependent on the amount you have used on the card. when you close a card that has an outstanding balance, the bank will show the amount you owe them; however, they will show the available credit balance as zero. So, credit card agencies will consider that you have completely used the entire amount on the card and closed it. This will reflect negatively on your credit score.
Another type of credit card that you should never think of closing is the card that offers some of the best features and benefits. Most of the cards that are being launched in the market today have some catch to it that makes usage difficult. If you have a card that you have applied for years ago and are offering you great interest rate and rewards, do not let it go. Talk to the credit card lender and come up with an alternative payment plan rather than closing it.
Do not close the first credit card you obtained especially if it is many years old. The oldest credit card carries a lot of value even when you apply for new cards. The lenders will take a look at the various cards that you hold and the time duration for which you have been using them before approving your new card application. While closing the old cards may impact you immediately, over a longer period of time you will see a decrease in your credit score which can be attributed to this.
Finally, if you have only one credit card, do not ever think of closing it. Getting a credit card is easier said than done. So, do not close the existing one with the dreams of opting for a new one. Lack of an existing card will lead your lender to believe that you are not good with handling credit cards and hence the chances of them rejecting your application are high.