Not Using My Credit Cards – A Good Idea?

By Eliza Daglish on May 22, 2012

Credit Cards Usage When an individual finds his or herself in debt, it may cross the mind to put all of those dangerously debt-laden credit cards away in a safe place – preferably out of reach. It is definitely a good idea to live within your means once you have overextended yourself, and putting your unneeded credit cards away is essential in getting your debt under control. In this article, we will discuss both the advantages and disadvantages to banishing your credit cards from your wallet or purse and find the appropriate balance that can be maintained in the long-term.

Lots of Debt? Stop the Spending

Let us clarify: if you are in over your head in credit card debt, there is no short-term reason to continue using your cards. Any disadvantages associated with not using them will be more than canceled out by the high levels of debt you are carrying, so cast aside any unnecessary cards. You do not necessarily want to cancel these cards (with the exception of unneeded cards that come with annual fees), but the spending must stop in order to repair your credit and financial livelihood.

Balance It Out

If your debt burden is “manageable” (debt-to-income ratio under 70% and/or credit card debt-to-income ratio under 25%), then you may want to continue to use your credit cards in a responsible fashion but make sure to pay the added balances off each month. For purchases such as gas, groceries and travel, your card may offer rewards points or cash back, so make sure to use your card and pay the balance off each month while doubling down on existing debt. Balanced spending combined with making more than the monthly minimum will lead to a long-term increase in your credit score, saving you money on virtually everything you buy on credit.

Other Things to Consider

Credit card companies will close out your accounts if they remain inactive for too long. Since it costs them money and they are making nothing in the process, they may do so after 90, 180 or 360 days of inactivity. Closing out formerly used lines of credit can also impact your credit score due to the amount of available credit decreasing and the overall debt-to-credit ratio increasing; by paying off some debt on existing cards, you are freer to cancel excess cards without penalty. The best way to navigate all of this is to occasionally use each card but not to the point where you are accruing loads of additional debt.

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