ADVERTISEMENT

Seeking low-interest cards in quest for a better credit score

Canceling old cards won't hurt, but paying bills on time will help most

By Jane McNamara

Let's Talk Credit
Let's Talk Credit columnist Jane E. McNamara
Jane E. McNamara is president and chief executive officer of GreenPath Debt Solutions, a nationwide, not-for-profit, providing financial literacy through consumer education and counseling for more than 50 years. For financial literacy tips and assistance visit GreenPath on Facebook or YouTube.
Ask a question.
'Let's Talk Credit' archive

Question for the CreditCards.com expert

Dear Let's Talk Credit,
I have four credit cards. All of them have pretty high interest rates because I got them a few years ago to build credit and I was young with no credit history. Now my credit score is pretty good, and I really don't use them anymore. Would canceling all of them hinder my credit score a lot or just a few points? I would like lower interest rates, but none of the cards are willing to do that for me, which is why I want to cancel them. Thanks in advance. -- Jake

Answer for the CreditCards.com expert

Dear Jake,
Congratulations on building a great credit history and credit score. I completely understand wanting lower interest rates on your cards. But, before we take on your entire question, I'd like you to think about how you plan to use a card with a lower interest rate. 

You should only be concerned with an interest rate if you plan on carrying a monthly balance. I would like to caution you that carrying a balance is something you should work to avoid, if possible. For example, if you need to replace a non-working refrigerator or you want a new television, it would be ideal and financially smart to save for those purchases and then buy them after you have saved enough money. But, if you decide you want to use credit for those purchases, develop a plan for how you will pay off the balance. I recommend carrying a balance for no longer than 90 days.

Now, for your question about canceling the cards: Your credit score will dip slightly if you cancel your cards and you have other positive credit accounts on your credit report. It may drop more drastically if these cards are your only credit accounts. However, if you are carrying balances, closing them could affect your "credit available" to "credit used" ratio. That change in your credit utilization ratio could lower your credit score.

You don't need all four credit cards from a scoring perspective, so you could always close two of them and keep the other two open. When closing, choose the cards that have an annual fee or any other fees associated with the account. As for the two you keep open, pay off the balance in full each month and you won't have to worry about the interest rate. If you are seeing a larger purchase coming up, where a balance will carry over for a number of months, you may want to shop around for a low-interest card.

Let's keep talking!

See related: 7 times when it's OK to cancel a credit card

Meet CreditCards.com's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Published: October 17, 2013


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Follow Us


Updated: 12-02-2016


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT