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6 reasons to break up with your credit card

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It was love at first swipe: That shiny piece of plastic caught your eye, every purchase brought a thrill and you planned on a bright future together. But now the spark is gone. Should you call it quits? Experts offer some advice on when it makes sense to kiss your credit card goodbye.  When to get rid of your credit card

1. "You don't treat me right." Bad customer service can be a good reason to part ways with your credit card company, experts say. It was reason enough for Craig Isaac, a North Carolina architect who is renovating a house and used his Home Depot credit card to buy everything from lumber to plants for the yard. He says he had a $3,000 balance and, right after he paid off all but $500, he handed his card to a cashier and it got declined. The next week, he got a letter stating that his credit limit had been lowered to about the amount of his outstanding balance. He called the issuer, Citibank. "I told them, 'With what you've done, I won't go back to Home Depot,' but they didn't care," he says. "It didn't matter how loyal a shopper I was." He says he switched his spending to his debit card.

How to make the break

There are many ways to cut ties with a credit card -- from the coy (let it languish in your wallet, but leave your options open) to the dramatic (cut up the card!) to the foolish (close the account in a huff). Here are some expert tips on the best way to move on:

Look at your options. Depending on the situation, you could call your card issuer and ask for a change that will make you happy -- for example, upping your credit limit or lowering your interest rate. Or you can play the field and look for a new card.
Consider keeping the account open. Closing the account will slash your available credit and affect your balance-to-limit ratio, which is the amount of available credit you're using. For example, imagine that you have two credit cards with $5,000 credit limits on each. One is maxed out; the one you want to cancel is paid off. If you close the paid-off card, you go from using half of your available credit to all of it. The result? A dip in your credit score.
Put your card away. If you keep the account open, but stop using the card, stop carrying it. "Put it in a safe deposit box across town or I've even had some clients who freeze it," says Consolidated Credit Counseling Services' Dvorkin.
If you close the account, do it for the right reason. There are a few good reasons to close an account, experts say. Ditch it if the card has a high annual fee you no longer want to pay or it's a secured card and you want your initial deposit back, for example. Another one: if you are unable to control your spending. "If more plastic equals more temptation, go ahead and take the hit on your credit card score," NFCC's Cunningham says. In the long run, she says, using credit irresponsibly would do more damage to your score anyway.

2. "Honey, you've changed." As evidenced by Isaac, credit card companies can change terms, leaving their customers feeling betrayed, experts say. Credit limits and interest rates are the most obvious switches, say experts, but changes in rewards programs are also common. "People almost go down memory lane, thinking about how long they've had a relationship with that card and say, 'How could you do this to me?'" says John Ulzheimer, president of consumer education at SmartCredit.com. But, he says, consumers need to realize it's just business: "If they're not comfortable doing business with you under the current terms, they're going to change the terms."

3. "We're not a good match anymore." You got a student credit card before you moved into the dorm, but now you have a posh apartment and a new job. Or maybe you got an airline rewards card when you were a jetsetter who spent vacations in the Caymans, but now you're a homebody who prefers to hang out on the couch. Or that low-interest card when you were broke came in handy when you carried a balance, but isn't so useful now that you have money in the bank and want to rack up rewards. "Your life changes, and so should the card," says Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc.

4. "It's not you. It's me." Your credit card might be fine, but experts say if you have issues with overspending, you might need to bid your card farewell. "People have to look at themselves in the mirror and know themselves," says Dvorkin, who says his average credit counseling client carries a whopping eight credit cards. "If you don't have a lot of willpower, you shouldn't be carrying around multiple credit cards. You should be carrying a debit card. That gives you the ability to pay for things without spending money you don't have."

5. "It's time to move on." Maybe you got a secured credit card or low-limit starter card when you needed to build or rebuild your credit, and now you're ready to take the next step. "You get this credit card and it's got a $500 or $1,000 limit on it. You will quickly outgrow that card," Ulzheimer says, especially if you want to start traveling for business or use your card heavily and pay it off each month to get rewards. You could ask your existing issuer to increase your credit limit, he says, but it probably makes more sense to shop for a new card.

6. "There's someone else." You saw an ad for a shiny new card with attractive perks, and it stole your heart. There's nothing wrong with starting a relationship with a new card that seems to better suit your needs and desires. "You should always look at your credit card business as being portable and be willing to take it somewhere else if you find a new card that appeals to you," Ulzheimer says.

No matter what you decide to do, experts say it's important to think things through first and not make any rash decisions. "We're all very emotional about our money," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. "But it's best to make financial decisions with your head, not your heart."

See related: 6 ways romance can ruin your finances

Published: October 12, 2012


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