Should I close my new Credit Card?

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bogglek3sh4v
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Should I close my new Credit Card?

Post by bogglek3sh4v »

I applied for a Chase Slate Credit Card and got it approved. I was hoping I can make a balance transfer towards my personal loan (6% interest which is pretty low already) to offset some interest charge. I figured I cannot do that (i should have done more homework :oops: ).
I have a pretty decent credit score (750+ FICO score). I have two other credit cards (AMEX blue cash everyday and Disocver it) which I pay off completely every month.
I can think of the following options
1. Apply for a Chase Freedom Unlimited and then merge the credit limits and close my Slate (Upgrading from Slate to Freedom will not make me eligible for the $150 sign up bonus :( )
2. Close my Slate card
3. Just live with the Slate card :| (or do option 1 in worst case)

Would closing my new credit card impact my credit score? I am sure it will, but by how much and what would be my best option?
*3!4!/5!
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Re: Should I close my new Credit Card?

Post by *3!4!/5! »

bogglek3sh4v wrote: I figured I cannot do that
Why not? It's a balance transfer card. That's basically the only reason it exists.
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bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

I called them up, they said they cannot transfer the balance towards a loan, only credit cards is what they mentioned.
lakpr
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Re: Should I close my new Credit Card?

Post by lakpr »

As a general rule of thumb, do not close credit cards that are younger than 2 years or older than 5 years.
If you close it now
- The hard inquiry that cost you 2 to 10 FICO points will not recover for at least 1 year
- The increase in total credit limit due to this card, which indirectly reduces your utilization ratio, would vanish; utilization factors up to 35% of your FICO score
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score

Closing the card now would consolidate all three negatives at once.

If you still feel strongly about not keeping the card, I think Chase would let you combine credit limits with another card that you are more interested in and may be able to get. Although I heard such combining credit limits can be done only when either card is open at least 6 months

Another alternative would be to do a product change to another Chase card. Caveat is that you would lose out on any promotional offer being offered on that card, and the above comment about 6 months also applies.
FB01
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Re: Should I close my new Credit Card?

Post by FB01 »

[quote="lakpr"]As a general rule of thumb, do not close credit cards that are younger than 2 years or older than 5 years.

I did not get your statement..you mean to say that that if I want to close credit card it should after 2 years but before it reaches 5 years? I can understand the impact if I close before 2 years but how does it impact if I close after 5 years?

Thanks
Thanks, | JR
*3!4!/5!
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Re: Should I close my new Credit Card?

Post by *3!4!/5! »

lakpr wrote: If you close it now...
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score
Wrong
*3!4!/5!
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Re: Should I close my new Credit Card?

Post by *3!4!/5! »

The 0% intro APR for 15 months on purchases could still be useful (unless utilization hurts you). You could delay paying for purchases, while paying down your loan quicker, then totally pay of the card before the 0% intro APR expires, but you would need good financial discipline to take advantage of this.
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bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

FB01 wrote:
lakpr wrote:As a general rule of thumb, do not close credit cards that are younger than 2 years or older than 5 years.

I did not get your statement..you mean to say that that if I want to close credit card it should after 2 years but before it reaches 5 years? I can understand the impact if I close before 2 years but how does it impact if I close after 5 years?

Thanks
I guess if you close after 5 years, your average of credit would drop considerably which impacts your credit score by a lot.
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bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

*3!4!/5! wrote:The 0% intro APR for 15 months on purchases could still be useful (unless utilization hurts you). You could delay paying for purchases, while paying down your loan quicker, then totally pay of the card before the 0% intro APR expires, but you would need good financial discipline to take advantage of this.
How about if I apply for a Chase Freedom and 6 months from now combine credit limits and then close the Chase Slate.

I was happy with 2 credit cards and one little mistake is causing me to have 4 now. My utilization is always low, what would happen if i dont use the Chase Slate card at all for the next 6 months?
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bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

*3!4!/5! wrote:
lakpr wrote: If you close it now...
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score
Wrong
I second that. I believe when you close a credit account, its age would disappear, so it could have an immediate impact but 10 years from now, it should have no impact on your credit score
*3!4!/5!
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Re: Should I close my new Credit Card?

Post by *3!4!/5! »

bogglek3sh4v wrote:
*3!4!/5! wrote:
lakpr wrote: If you close it now...
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score
Wrong
I second that. I believe when you close a credit account, its age would disappear, so it could have an immediate impact but 10 years from now, it should have no impact on your credit score
The card continues to age, and to count towards average age, whether closed or open (though it drops off the report 10 years after closing).
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bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

*3!4!/5! wrote:
bogglek3sh4v wrote:
*3!4!/5! wrote:
lakpr wrote: If you close it now...
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score
Wrong
I second that. I believe when you close a credit account, its age would disappear, so it could have an immediate impact but 10 years from now, it should have no impact on your credit score
The card continues to age, and to count towards average age, whether closed or open (though it drops off the report 10 years after closing).
I did not get that. So if I close my Slate card now which I opened less than a week ago, will it still continue to age? That makes no sense. Why would it? The account is closed, the credit limit is gone. Why would they factor a closed card's age?
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bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

bogglek3sh4v wrote:
*3!4!/5! wrote:
bogglek3sh4v wrote:
*3!4!/5! wrote:
lakpr wrote: If you close it now...
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score
Wrong
I second that. I believe when you close a credit account, its age would disappear, so it could have an immediate impact but 10 years from now, it should have no impact on your credit score
The card continues to age, and to count towards average age, whether closed or open (though it drops off the report 10 years after closing).
I did not get that. So if I close my Slate card now which I opened less than a week ago, will it still continue to age? That makes no sense. Why would it? The account is closed, the credit limit is gone. Why would they factor a closed card's age?
Found this on CreditKarma

"Could lower your average age of accounts. While closing a credit card won't impact your average age of accounts right away, as closed accounts remain on your report for seven to ten years, if you close a card that is significantly older than your other cards, it could lower your average age of accounts when it finally falls off your report. Additionally, some credit scoring models may use only the average age of open and active accounts as a factor, which is why we only use your open accounts when calculating your average age of credit history on Credit Karma. While your average age of accounts isn't typically the most important factor used to calculate your score, it does matter and can negatively impact your credit health if it falls."

https://www.creditkarma.com/article/clo ... it-effects

I guess you were right.
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grabiner
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Re: Should I close my new Credit Card?

Post by grabiner »

lakpr wrote:As a general rule of thumb, do not close credit cards that are younger than 2 years or older than 5 years.
If you close it now
- The hard inquiry that cost you 2 to 10 FICO points will not recover for at least 1 year
- The increase in total credit limit due to this card, which indirectly reduces your utilization ratio, would vanish; utilization factors up to 35% of your FICO score
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score

Closing the card now would consolidate all three negatives at once.
Two of the three factors will still count even if you keep the card open. The important factor is utilization; if this doesn't matter to you (that is, you will be below 20% of your credit limits with or without the card), closing the card doesn't hurt your score significantly compared to keeping it open.

Closing an old card has a negative effect, but not immediately; years in the future, the card will drop off your record and increase your average age of accounts.

But you also have to decide whether any of this matters. There is no special benefit in having an extremely high credit score; if your score is good enough to get the credit you need, it makes sense to do things which decrease the score slightly but which have a financial benefit (such as opening a new card for the benefits, or closing a card which is too expensive).
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bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

grabiner wrote:
lakpr wrote:As a general rule of thumb, do not close credit cards that are younger than 2 years or older than 5 years.
If you close it now
- The hard inquiry that cost you 2 to 10 FICO points will not recover for at least 1 year
- The increase in total credit limit due to this card, which indirectly reduces your utilization ratio, would vanish; utilization factors up to 35% of your FICO score
- Up to 10 years into the future the age on this card would contribute zero (or 1 month) towards the "average age of accounts" that's about 30% of your FICO score

Closing the card now would consolidate all three negatives at once.
Two of the three factors will still count even if you keep the card open. The important factor is utilization; if this doesn't matter to you (that is, you will be below 20% of your credit limits with or without the card), closing the card doesn't hurt your score significantly compared to keeping it open.

Closing an old card has a negative effect, but not immediately; years in the future, the card will drop off your record and increase your average age of accounts.

But you also have to decide whether any of this matters. There is no special benefit in having an extremely high credit score; if your score is good enough to get the credit you need, it makes sense to do things which decrease the score slightly but which have a financial benefit (such as opening a new card for the benefits, or closing a card which is too expensive).
That is useful info, I will use the 0% APR and pay my loan quicker.
*3!4!/5! wrote:The 0% intro APR for 15 months on purchases could still be useful (unless utilization hurts you). You could delay paying for purchases, while paying down your loan quicker, then totally pay of the card before the 0% intro APR expires, but you would need good financial discipline to take advantage of this.
This makes a lot of sense. I can make use of this card without having to open another one when I don't need it.
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Re: Should I close my new Credit Card?

Post by cherijoh »

grabiner wrote: Closing an old card has a negative effect, but not immediately; years in the future, the card will drop off your record and increase your average age of accounts.
:confused did you mean decrease your average age of accounts?
Topic Author
bogglek3sh4v
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Re: Should I close my new Credit Card?

Post by bogglek3sh4v »

cherijoh wrote:
grabiner wrote: Closing an old card has a negative effect, but not immediately; years in the future, the card will drop off your record and increase your average age of accounts.
:confused did you mean decrease your average age of accounts?

I believe that was what he meant 'decrease'
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Re: Should I close my new Credit Card?

Post by Dilbydog »

I know Discover and Amex are constantly sending me "checks" that I can write, which will be funded from the respective credit card. I would look to pay off the loan with one of these checks, and then do a balance transfer from the originating CC to your Slate. It's a little more leg work, but not that big of a deal. Just remember, I believe Slate has a 30 or 60 day window to complete a balance transfer without incurring a transfer fee. In addition, the max you can transfer for the no interest period is $15k even if you have a substantially higher credit limit.
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Re: Should I close my new Credit Card?

Post by patrick »

Dilbydog wrote:I know Discover and Amex are constantly sending me "checks" that I can write, which will be funded from the respective credit card. I would look to pay off the loan with one of these checks, and then do a balance transfer from the originating CC to your Slate. It's a little more leg work, but not that big of a deal. Just remember, I believe Slate has a 30 or 60 day window to complete a balance transfer without incurring a transfer fee. In addition, the max you can transfer for the no interest period is $15k even if you have a substantially higher credit limit.
Keep in mind there is usually a significant fee for using those checks.
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Re: Should I close my new Credit Card?

Post by Jags4186 »

bogglek3sh4v wrote:I applied for a Chase Slate Credit Card and got it approved. I was hoping I can make a balance transfer towards my personal loan (6% interest which is pretty low already) to offset some interest charge. I figured I cannot do that (i should have done more homework :oops: ).
I have a pretty decent credit score (750+ FICO score). I have two other credit cards (AMEX blue cash everyday and Disocver it) which I pay off completely every month.
I can think of the following options
1. Apply for a Chase Freedom Unlimited and then merge the credit limits and close my Slate (Upgrading from Slate to Freedom will not make me eligible for the $150 sign up bonus :( )
2. Close my Slate card
3. Just live with the Slate card :| (or do option 1 in worst case)

Would closing my new credit card impact my credit score? I am sure it will, but by how much and what would be my best option?
Instead of closing the card, look at what else Chase offers and ask the card be converted to that. Chase Freedom has rotating 5x point categories and Chase Freedom Unlimited is a 1.5x on all spend card. Seeing how difficult it is to get Chase cards these days, I would not waste the opportunity.
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Re: Should I close my new Credit Card?

Post by Dilbydog »

patrick wrote:
Dilbydog wrote:I know Discover and Amex are constantly sending me "checks" that I can write, which will be funded from the respective credit card. I would look to pay off the loan with one of these checks, and then do a balance transfer from the originating CC to your Slate. It's a little more leg work, but not that big of a deal. Just remember, I believe Slate has a 30 or 60 day window to complete a balance transfer without incurring a transfer fee. In addition, the max you can transfer for the no interest period is $15k even if you have a substantially higher credit limit.
Keep in mind there is usually a significant fee for using those checks.
Highest I've seen is 3%
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Re: Should I close my new Credit Card?

Post by patrick »

Dilbydog wrote:
patrick wrote:
Dilbydog wrote:I know Discover and Amex are constantly sending me "checks" that I can write, which will be funded from the respective credit card. I would look to pay off the loan with one of these checks, and then do a balance transfer from the originating CC to your Slate. It's a little more leg work, but not that big of a deal. Just remember, I believe Slate has a 30 or 60 day window to complete a balance transfer without incurring a transfer fee. In addition, the max you can transfer for the no interest period is $15k even if you have a substantially higher credit limit.
Keep in mind there is usually a significant fee for using those checks.
Highest I've seen is 3%
I've seen them at 5%. Note also that they are usually otherwise treated as cash advances -- that is, they have a higher interest rate than regular purchases and the interest starts immediately without a grace period.
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Pajamas
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Re: Should I close my new Credit Card?

Post by Pajamas »

Why would you do a cash advance from a credit card to pay off a 6% loan?

Right now the interest rate on cash advances from Chase Freedom is 25.24% and if the prime rate goes up it would be even higher.

https://applynow.chase.com/FlexAppWeb/p ... e=appterms

Plus there is a fee for a cash advance of $10 or 5%, whichever is greater.
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Re: Should I close my new Credit Card?

Post by Spirit Rider »

Pajamas wrote:Why would you do a cash advance from a credit card to pay off a 6% loan?

Right now the interest rate on cash advances from Chase Freedom is 25.24% and if the prime rate goes up it would be even higher.

https://applynow.chase.com/FlexAppWeb/p ... e=appterms

Plus there is a fee for a cash advance of $10 or 5%, whichever is greater.
Because if you read the OP's post, nobody said anything about a cash advance. You will see that it was Chase Slate card applied for and received to do a balance transfer. Which has 0% for 15 months on purchases and balance transfers with no balance transfer fee during the first 60 days.

So, $0 balance transfer fee and 0% for 15 months is an excellent way to pay off a 6% loan with out any cost.
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Re: Should I close my new Credit Card?

Post by Pajamas »

Spirit Rider wrote:
So, $0 balance transfer fee and 0% for 15 months is an excellent way to pay off a 6% loan with out any cost.
Are there credit cards that will allow you to do a balance transfer to a personal loan rather than another credit card?
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Re: Should I close my new Credit Card?

Post by nisiprius »

These are just my personal opinions. I think the credit bureaus and credit card companies have been devilishly clever at somehow getting people to obsess over credit scores. I think that by and large you should do what makes financial sense and let the credit scores fall where they may. The only exception would be if you were planning a major credit purchase in the very near future and believed your credit score was marginal enough that even a small knock would make a difference.

Advice that cancelling a card "may lower your credit score" is useless advice if there is no indication of how much it will lower it.

In 2014 I indeed opened a credit card--an affinity card connected with a resort--to get $150 in "free money" ($200 but a $50 annual fee was incurred immediately)--with a plan to cancel before the next annual fee kicked in. It all worked as planned. The result of cancelling was to knock my credit score down about twenty points. Big deal. Why would I care? It took it about two years to recover.

I believe there are very good reasons, mostly psychological, for not holding on to credit cards you are not using. First, it increases the temptation to use one. Let's say you are uncomfortably aware that cards X and Y are pushing near their limits, and you feel like buying something. Instead of being restrained by knowing that you're close to the limit, it's tempting to use card Z. It's also tempting to use cards that have built-in temptations for use (oooh, I said I'd just keep it in the drawer, but the email says it's Department Store time for that card, and if I don't run out right now and buy a new Kuerig machine at a department store on that card, I'll be missing out on $3.67 in cashback bonuses...)

I can sort of mentally track the checking account. Even with one credit card, I can't--come time to pay, there are always a couple of hundred dollars' worth of stuff in $20 here, $55 there that I forgot about. With two or three credit cards, it becomes impossible to mentally retain running totals. Your feeling of being able to "afford" something is no longer influenced by your debt because you don't have an accurate debt total in your head.

Finally, with regard to signing bonuses and cashback deals, yeah, I sometimes do them, but I think as a general rule it is unwise to steal bait from mousetraps. The reason you can get a few hundred dollars in "free money" here and there is that it is absolutely worth it to them to get you signed up. Especially if you are afraid to cancel a card for fear of what it will do to your credit score.

Remember, a high credit score does not mean "prudent." It means only one thing: it means you are someone they think they can successfully milk for as much in finance charges as possible.
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Re: Should I close my new Credit Card?

Post by Spirit Rider »

nisiprius, I agree with most of your post except for the last paragraph.
nisiprius wrote:Remember, a high credit score does not mean "prudent." It means only one thing: it means you are someone they think they can successfully milk for as much in finance charges as possible.
A credit score is a risk assessment; "nothing more, nothing less".

Someone with a good (650 - 700), but not great (750 - 800) credit score is probably more likely to carry a balance and be a more profitable customer.

In fact, the credit card industry considers someone who never carries a balance a "deadbeat" unprofitable customer.
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Re: Should I close my new Credit Card?

Post by grabiner »

Spirit Rider wrote:nisiprius, I agree with most of your post except for the last paragraph.
nisiprius wrote:Remember, a high credit score does not mean "prudent." It means only one thing: it means you are someone they think they can successfully milk for as much in finance charges as possible.
A credit score is a risk assessment; "nothing more, nothing less".

Someone with a good (650 - 700), but not great (750 - 800) credit score is probably more likely to carry a balance and be a more profitable customer.

In fact, the credit card industry considers someone who never carries a balance a "deadbeat" unprofitable customer.
The term "deadbeat" may still be used, but cardholders who pay in full every month can be very profitable if they charge a lot. This is why credit cards are available for such customers, and banks keep them open with large rewards. If you charge $50,000 on your airline card, and the bank collects $1000 in interchange fees and pays $500 to the airline for the frequent-flyer miles, it makes a $500 profit.
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Re: Should I close my new Credit Card?

Post by cholan »

I got a chase preferred card 6 months ago to get bonus miles. Chase wanted to close another account I had with them and drop my credit limit by 50 percent. I agreed, without realizing at that time the the card they closed was my oldest account, more than 20 years old! Next month my credit score dropped 12 points and a month after it dropped another 9 points, staying there for 3 months. Now my score is back up to what it was before.
...leaving not a rack behind.
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