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Scott,
I heard you this morning on the radio and didn't get a chance to
call in. I had a quick question. Once I pay off my credit cards,
does it help my credit to leave that account open, or should I close
this account? Thanks.
--Nathan
Nathan,
 Thanks
for listening!
Many people ask me this
question--it's a great one.
My opinion is that you should always
leave accounts open after they're paid off unless there is a reason
to close the account. Once a credit card is paid
off you'll more than likely receive great offers from that bank. Their computers
will look through their databases and come up with, "hey, we're
not making money from this account, send him a 0% transfer
offer!"
That doesn't mean that you should
take advantage of every credit card offer you receive but being the
recipient of these offers gives you financial flexibility, credit
options, and that is power! Power to never be at the mercy of any
one single bank.
There are circumstances that may
require you to close an account after it's paid off. Those instances
are very rare. The main reason would if you're trying to get a new
mortgage or refinance. Many banks may ask you to close open lines of
credit to reduce their risks when giving you a mortgage. Otherwise,
it is not going to hurt to have a zero balance credit card.
The bottom line here is that open
credit is good. Good when it's used wisely. Wisely, meaning to reduce
the cost of other debt or for emergencies.
Hope that helps!
Regards,
Scott
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