Unused Credit Cards Can Cause Problems for Chicago Cardholders
Cutting back on your credit cards is a good thing - cutting up credit cards, on the other hand, might be going too far.
With many folks becoming more cautious about taking on debt, it's become popular to forgo plastic for cash or debit - or to at least to cut back on the number of credit cards in use, according to Chicago bankruptcy attorneys. Some cardholders have even taken it to the extreme, cutting up credit cards or canceling accounts.
But sometimes not using a card can be almost as bad for your credit as using it.
Let's say you decide to close a credit account. You're also closing out that card's credit limit, meaning your overall credit availability will decrease. Your debt, however, stays the same. That means you've automatically raised your debt-to-credit ratio - which can damage your credit and make it harder to get a loan.
OK, so closing an account isn't a good idea. Why not just leave the account open - but don't use the card? Here's the problem. With credit tight, more and more banks are closing inactive accounts - sometimes with little warning to customers. You just can't win!
So how about this for a solution? Consider charging regular expenditures on your card - say, your Internet service or cell phone bill. It's something you know you can pay off each month, so you don't have to worry about adding to your debt. At the same time, you don't have to worry about one day finding out the bank closed your account.
There is an exception to the rule. If there's a large annual maintenance fee or some other unfair expense associated with the account, you might have to bite the bullet and close it. But before you do, try to work with the credit card company. They may be able to replace your card with one that better fits your needs.
Remember, when used correctly credit cards can actually raise your credit score. However, if you're carrying a large amount of debt on your cards, you're doing major damage. Bankruptcy might be the most effective way for you to lower debt and start rebuilding your finances. It's free to find out more when you sign up for a personal debt analysis with one of our professional bankruptcy attorneys in Chicago.