Credit Cards: To Cut or Not To Cut?

Credit Cards: To Cut or Not To Cut?

Do I cut up my credit cards? Over the decades of teaching and working with people on the topic of money, this question comes up rather often.

Should I cut up my credit cards and close my account or not?

As I always say, every action has a consequence, so let’s find out…

The Reason

When people inquire about cutting their credit cards, they are often at that point when they are in debt and looking for a way to get out.

While cutting the credit cards gives the immediate satisfaction that you’ve done something, it gives nearly zero results in the actual debt elimination.

The cutting of the card does only one thing: make many pieces of plastic for you to dispose of.

If that is what you’re looking for, then cut away.

If debt elimination is your end goal, cutting will do absolutely nothing, other than prevent you from using it.

A Better Way

Instead of cutting the card, focus on your behavior and habits.

If you cannot trust yourself with your credit card in your wallet for the fear of having very little discipline on whether you should use it, a simpler solution may be of leaving the card at home.

The second and more powerful solution is to create some discipline in your life.

How do you do that?

  1. Start paying attention to your impulses and figuring out why you have an impulse to spend money you don’t have.
  2. Practice discipline through simple daily tasks:
    1. Make your bed every morning
    2. Go for a walk or work out on consistent basis
    3. Practice mindfulness in all that you do
  3. Create your WHY when it comes to financial discipline and decipher which is more important:
    1. Your money and financial freedom
    2. Your stuff

Once you can figure out these things and implement some simple practices above, your money behavior will improve.

The Quick Fix

If you have a balance, you cannot close the account before you pay it off. I think that’s important to mention as many people look for a quick fix for a long-term problem.

The quick fix is filing bankruptcy, but this strategy can have long-term negative impact on your credit score and your future buying, leasing, renting, and other financial abilities.

Paying the debt off is a somewhat longer process, however it leaves you empowered and more importantly emotionally invested in the important lesson of don’t spend more than you earn.

The quickest fix to the debt problem is to STOP BORROWING.

The second step is to start paying things off.

To Close or Leave Open?

Closing the account can have a negative impact on your credit score and future borrowing ability.

The more credit you have available to you and the longer that history is, the better.

While you can close the account, it is not recommended.

As I always teach, just because you have it, it doesn’t mean you have to use it.

Most of us own umbrellas. But just because you have it, chances are you are not walking around with an open umbrella all the time. Right?

So, why should availability to credit be any different?

Interested to learn more about how to improve your financial picture? Get Nev’s latest book “Money EMT” FREE.