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 Post subject: What should I do with my old credit card?
PostPosted: Mon Nov 26, 2012 8:49 pm 

Joined: Mon Nov 26, 2012 8:44 pm
Posts: 5
My credit score is a work in progress to say the least.

Last year at this time I signed up for my first credit card in several years. It was a Capital One card that gave me a $200 limit with a $75 security deposit and a $29.95 annual fee. I got it with the goal of establishing positive history with Capital One so I could get a better card and begin to repair my credit history.

Today I received my offer for a better card. $1,000 limit and no annual fee or security deposit.

My question stems from what I've always heard others talk about. You always keep open your oldest card. Is that really important in this situation? I hate to pay a $29.95 fee yearly just to hold onto a card that also has $75 of my money. I both worry about damaging my credit score and my standing with capital one. What would you recommend?


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Mon Nov 26, 2012 9:42 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 292
Location: Atlanta, Georgia
Having shown responsible use of credit in the past year, you might try calling Capital One and asking if they can convert your original account into another one of their cards that does not require an annual fee and possibly allows for the return your security deposit, too. You may want to mention the tempting other offer that you recently received. I did that before with a Delta SkyMiles Amex card where I got the gold card during a promo for waiving the first year's annual fee, and then when the next year's fee was coming due, they were willing to turn it into their basic SkyMiles card that does not have an annual fee. They were happier keeping my business and the account open rather than losing it all together.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Tue Nov 27, 2012 6:34 am 

Joined: Mon Nov 26, 2012 8:44 pm
Posts: 5
Thanks for the suggestion. I accepted the offer I received so I have that card coming.

I will definitely contact Capital One to see if they can do something to make it a card without an annual fee.

IF that doesn't work, what should I do? Since I only have a year on that card and it has a very small credit limit should I just cancel it?


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Tue Nov 27, 2012 8:11 am 

Joined: Mon Nov 26, 2012 8:44 pm
Posts: 5
I just spoke with someone at Capital One and they told me they could not change it from a secured card like it was to a regular credit card without a fee.

At this point I think the only reasonable option I have is to cancel it and take the one year of credit history hit.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Tue Nov 27, 2012 8:23 am 

Joined: Mon Nov 26, 2012 3:00 pm
Posts: 8
I'm pretty sure the closed account stays on your credit report for several years for purposes of length of credit history. Where closing an account hurts you is in decreasing your total credit available, thereby increasing your credit utilization ratio. It sounds like that is not your primary concern at this point, so I'd say go ahead and close the account to save yourself the fees.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Tue Nov 27, 2012 1:33 pm 

Joined: Mon Nov 26, 2012 8:44 pm
Posts: 5
Thanks, that helps put my mind at ease.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Tue Nov 27, 2012 2:30 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 292
Location: Atlanta, Georgia
I agree it's probably not worth paying an annual fee just to keep the starter credit card open with just one year of history, BUT I would not cancel it until you actually receive the new card just in case your pre-approval gets reversed for some reason because then you'd be stuck without a card and maybe in a more difficult position in trying to get another one.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Wed Nov 28, 2012 5:32 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1616
Location: Seattle, WA
If you have imminent plans to use your credit score, e.g. buy a house or car with a loan in the next year, then keep it. Otherwise cancel it. In the long run, one year of history is just noise. It helped you get your unsecured card, its purpose is done, time to bid a fond farewell.

Nobody really knows how the scoring formula works. But my understanding of other people's wild speculation is that the score is affected by your oldest, still active account. So canceling it will hurt a little. Also, your score is affected by your utilization ratio (total debt divided by total credit), so in general, it sometimes hurts and never helps your score to cancel an unused card. Still, that doesn't mean it's worth paying annual fees on unused cards in perpetuity.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Fri Nov 30, 2012 1:39 pm 

Joined: Fri Nov 30, 2012 1:32 pm
Posts: 9
Cut it up and cancel it, if your credit score is adversely affected by a $200 credit card, your not in position to borrow money anyhow.

I'm a little biased as my personal philosophy is I will never have a credit card, so my advice is to get a debit card instead and build up a good history on that.
(No fees, no interest, no risk) :D
Cheers
Skiwi


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Sat Dec 01, 2012 5:57 pm 

Joined: Mon Nov 26, 2012 3:00 pm
Posts: 8
Skiwi wrote:
I'm a little biased as my personal philosophy is I will never have a credit card, so my advice is to get a debit card instead and build up a good history on that.


Unfortunately, having a good history with a debit card does not help your credit score as much as having a good history with a credit card. I'm not sure it helps it at all, in fact.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Sun Dec 02, 2012 11:34 am 

Joined: Mon Oct 08, 2012 10:03 am
Posts: 19
I would just shred the card and keep it open or keep using the card once every few months then pay it off completely so they do not reduce your credit line. One aspect of credit score is the total amount of credit you have and your unused credit.

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 Post subject: Re: What should I do with my old credit card?
PostPosted: Mon Dec 03, 2012 9:22 am 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5370
Skiwi wrote:
I'm a little biased as my personal philosophy is I will never have a credit card, so my advice is to get a debit card instead and build up a good history on that.
(No fees, no interest, no risk) :D
Cheers
Skiwi


Then you will never own a home, you will pay far more than your peers on insurance, and you will miss our on many other things in life. You may not like the game and you are free not to play it but not having good credit is far more expensive than most people think.

A debit card offers few of the fraud protections of a credit card. Debit cards will soon have higher fees than credit cards (because they presently cost more to run and banks have no way to recoup those fees.)

Even if you save up and pay cash for a home, you will pay more in the opportunity costs than those who finance.

I understand that you might be willing to pay extra to maintain your personal philosophy. But you should educate yourself regarding how costly that philosophy really is.


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Mon Dec 03, 2012 10:58 am 

Joined: Fri Nov 30, 2012 1:32 pm
Posts: 9
DoingHomework wrote:
Skiwi wrote:
I'm a little biased as my personal philosophy is I will never have a credit card, so my advice is to get a debit card instead and build up a good history on that.
(No fees, no interest, no risk) :D
Cheers
Skiwi


Then you will never own a home, you will pay far more than your peers on insurance, and you will miss our on many other things in life. You may not like the game and you are free not to play it but not having good credit is far more expensive than most people think.

A debit card offers few of the fraud protections of a credit card. Debit cards will soon have higher fees than credit cards (because they presently cost more to run and banks have no way to recoup those fees.)

Even if you save up and pay cash for a home, you will pay more in the opportunity costs than those who finance.

I understand that you might be willing to pay extra to maintain your personal philosophy. But you should educate yourself regarding how costly that philosophy really is.


*Sigh*
I own my own home, (with a mortgage guaranteed to be .5% lower than the going rate for the next 5 years) I pay less for insurance than my peers and my debit card has identical fraud protections to a credit card with NO fees.

Have you really been seduced so far by the myth of the need to carry debt on a credit card in order to have a good credit rating that you really believe this? WAKE UP AMERICA! :(
Don't confuse carrying a credit card with being credit worthy.....

And what things will I miss in life? the joy of a monthly credit card bill?? I can't think of another single item.

You should educate yourself on the real cost of carrying consumer debt as a matter of course :fubar:
Cheers
Skiwi


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Mon Dec 03, 2012 12:08 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 292
Location: Atlanta, Georgia
Skiwi wrote:
Have you really been seduced so far by the myth of the need to carry debt on a credit card in order to have a good credit rating that you really believe this? WAKE UP AMERICA! :(
Don't confuse carrying a credit card with being credit worthy.....

And what things will I miss in life? the joy of a monthly credit card bill?? I can't think of another single item.

You should educate yourself on the real cost of carrying consumer debt as a matter of course :fubar:

Skiwi, I take it you're not that familiar with DH and his various posts around this forum. Nowhere did he advocate carrying consumer debt. I believe he means that having a single credit account is important for purposes of building a good credit history, on which a number of other life things hinge (e.g., being able to qualify for a mortgage, favorable employment credit checks, lower insurance rates). Wholly consistent with DH's post is to have/use a credit card, but pay it off in full every single month. That is the sort of responsible credit behavior that, over time, garners access to the better opportunitites for mortgage, insurance, etc. Are you saying that you have never ever held a credit card in your life? Are you saying that securing your mortgage (that is "guaranteed" to be 0.5% below the "going rate," whatever that means) was the very first use of credit you ever made in your entire life? And how do you know that you "pay less for insurance than [your] peers"?


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 Post subject: Re: What should I do with my old credit card?
PostPosted: Mon Dec 03, 2012 12:29 pm 

Joined: Fri Nov 30, 2012 1:32 pm
Posts: 9
LeRainDrop wrote:
Skiwi wrote:
Have you really been seduced so far by the myth of the need to carry debt on a credit card in order to have a good credit rating that you really believe this? WAKE UP AMERICA! :(
Don't confuse carrying a credit card with being credit worthy.....

And what things will I miss in life? the joy of a monthly credit card bill?? I can't think of another single item.

You should educate yourself on the real cost of carrying consumer debt as a matter of course :fubar:

Skiwi, I take it you're not that familiar with DH and his various posts around this forum. Nowhere did he advocate carrying consumer debt. I believe he means that having a single credit account is important for purposes of building a good credit history, on which a number of other life things hinge (e.g., being able to qualify for a mortgage, favorable employment credit checks, lower insurance rates). Wholly consistent with DH's post is to have/use a credit card, but pay it off in full every single month. That is the sort of responsible credit behavior that, over time, garners access to the better opportunitites for mortgage, insurance, etc. Are you saying that you have never ever held a credit card in your life? Are you saying that securing your mortgage (that is "guaranteed" to be 0.5% below the "going rate," whatever that means) was the very first use of credit you ever made in your entire life? And how do you know that you "pay less for insurance than [your] peers"?


No, I had a credit card when I was younger and wanted everything NOW. I've since grown up.
.5% lower than whatever the current ARM is, I have a split mortgage and my fixed portion is on similar terms.
Still use credit in a manner of speaking (phone, power etc)
And I know I have lower insurance using the same math as DH does when he tells me I'm paying more.....;). Actually it's very hard to compare as all policies have subtle differences that make them difficult to compare, I can only go on conversations I've had with others in a similar situation.

I just shake my head that the majority has been duped into believing that to not have a credit card is a bad thing, you can still get everything anyone with a credit card can, without the additional risk and cost.
You CAN have a good credit rating without a credit card
Cheers
Skiwi


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