There are those who grow so tired of credit card debt that they come up with a drastic solution: They’re just going to get rid of their cards forever. They’ll cut them up, pay off the balance, and close the accounts. They’re done living with debt.
This can work for some people and often sounds like an attractive idea, but there are downsides that you need to consider. This isn’t to say you shouldn’t think about eliminating debt, but you need to know what each action you take is really going to mean.
For one thing, getting rid of your cards will lower your credit score. This doesn’t mean you’re a high risk, but, if you don’t use credit, lenders simply don’t know if you’re a risk or not.
This can have a financial impact in many areas. You could end up paying more for car insurance each month, for instance. If you go to buy a house or a car and you don’t have the cash on hand, it could be harder for you to get a loan.
It can also be harder to get money in an emergency situation. Now, you can save up an emergency fund, but you open the door to risk with no cards. If you need that extra $500 for medical costs, to fix your car, or for something else you can’t put off, you’re out of luck if your bank account isn’t big enough.
Remember, as you look into your debt solutions in Washington, that you always want to look at the big picture. When you know how your choices will impact your future, you can make the best decisions for you and your family.
Source: Better Credit Blog, “On Dave Ramsey and Why You Shouldn’t Cut Up All Your Credit Cards,” Ryan Greeley, accessed Oct. 06, 2016