Credit cards are essential to adulting and working your way up in the world one point at a time. Credit cards offer convenience and flexibility when you need money that isn’t available at the moment. Many individuals avoid using credit cards due to high-interest rates and excessive spending, thus digging themselves into a financial hole. 

Credit cards offer numerous benefits like cash back, travel rewards, bonuses, international use, and a variety more when used responsibly. If you are thinking about canceling your credit card after paying it off, read more in today’s blog by Volt Credit Union to determine if this is the right choice for you. 

How Credit Cards Affect Your Credit Score 

The amount of credit available to you versus how often you swipe your card affects your credit score. The general rule of thumb when it comes to credit utilization is to keep your usage below 30 percent. For instance, if your credit limit is $300, 

30 percent of $300 is $90. You should spend no more than $90 a month on your credit card to keep your score intact. Lower utilization suggests to creditors that you are fiscally responsible and do not rely too heavily on credit for your daily needs. In a sense, lower utilization means a higher score and vice versa. When you swipe too often or use too much of your credit limit, you are suggested as a high-risk user lowering your score and making approval less likely for other purchases like a house or a new car. For future use, remember to keep your card use under 30 percent and pay the bill off right away or before the end of the month to avoid penalties and an impacted score. 

How Canceling Unused Credit Cards Impact Credit 

If you are wondering whether you should cancel your credit card after paying it off, the short answer is, No. Closing the account could negatively impact your score. Removing a card affects the amount of available credit to you, and closing it may cause more harm than holding onto the card with no intention of using it. Let’s say you have two credit cards; one card has a balance of $1,000 while the other has a balance of $2,000. 

If your total credit card debt amounts to $800, your credit utilization amounts to 26 percent. Let’s say you cancel the $1000 card, but your credit debt is still $800. $800 out of $2000 is 40 percent of your total credit utilization, which negatively impacts your FICO score

FICO is the culmination of all 3 credit bureau scores and the one that most lenders consider. The best course of action is to pay off all your credit card debt and allocate your card toward specific purchases like cash, groceries or emergencies only. That way, you can pay off your credit card right away without the worry of over-spending. 

What to Do Once Your Credit Card Is Paid Off 

If you are truly worried about over-using your credit card, leave it in a safe and secure place before leaving your home. Without your card, you won’t have to worry about spending money you do not have. Exercising self-control is also an essential trait if you plan on becoming a credit cardholder. 

Do not use your credit card for a purchase you can not pay off right away. Sticking to this plan will keep your financial stress down and make you a responsible cardholder. Finding other savings methods to increase your finances will also prevent you from relying too heavily on your credit card.

Open a Volt Credit Card Today 

At Volt Credit Union, we revolt against the high interest rates of commercial banking. We offer fantastic credit rates with no annual fees, grace periods, and travel accident insurance at no cost to our loyal members. Whether you’re looking to buy a house, save for college, or retire early, Volt Credit Union has the plans best suited for your lifestyle. Join the Volt Credit Union family today; for more information, call us today at 417-862-0471.

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