Credit Card Renewal - Cancel?

In today's mail, I unexpectedly received a credit card renewal for a Mastercard that I hardly ever use. It was unexpected because my existing card wasn't due to expire until June 07. The new card that I
received extends that by two years.
In reading through the letter, I was shocked to see how high my credit limit was on this card. (I'll be checking the limits on my other cards today....) It is way more than I would ever need, and makes me more than a bit uncomfortable of the consequences if ever it gets stolen or lost.
Besides this card, I have 1 Visa, another Mastercard, and 1 DiscoverCard, which should suffice for me. So, I'm considering just canceling this card altogether.
However, I've read that canceling a credit card account could have a negative impact on your credit score.
So, I'm looking for suggestions -- Cancel the account? Request a lowered credit limit? Or just lock up the card in a safe place and don't use it unless there's an emergency?
Any thoughts on this would be appreciated.
Thanks!
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
BRH wrote:

Just lock it up in a safe place.
-Mark Bole
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I wonder if your credit card company was sold to another company. For example, MBNA was recently sold. All of my MBNA cards are being reissued. They still stay MBNA, but also say Bank Of America, too. Each one was extended, and none were up for renewal.

If you don't need it, cancel it. It is a risk waiting for something bad to happen. Eliminate the risk. I wouldn't worry too much about your credit score. Unless you are looking to get credit for something major in the next few months, it will be a non factor. Cancelling a card may ding you 10 or 20 points, not the 50 or 100 points that it would take to make a difference. And those points come back over time as long as you behave.
-john-
--
======================================================================
John A. Weeks III 952-432-2708 snipped-for-privacy@johnweeks.com
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I am with you. Even though there are laws limiting liability I don't see having more credit on a CC than is reasonable.
When I applied for a cash back Master Card CC from my credit union after canceling a non-cashback CC from another source, they asked _me_ what limit _I_ wanted. I picked a reasonable limit (to me), and that is what it is.
--
-Ernie-


Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Ernie Klein wrote:

Thanks to all who responded to the original question. I decided to renew the card at a much lowered credit limit, and have stashed it away for limited usage.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
BRH wrote:

I've heard of putting CC in water, then putting it in freezer, preventing impulse purchases (you have to wait as long as it takes to melt the ice before using card).
While I don't have any cards in my freezer, I have several cards companies gave me, all safely stashed away. I believe my annual credit card limit is well above my annual income.
use judiciously and you will be OK.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Ice melts too fast if you put it under hot water. But you could put them in a big jar of molasses and bury it in your back yard. Take your time digging so it is down very deep. Deep enough so it would take hours to get to it, and you still would need to get the molasses off.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Maybe it would be best to live in Alaska, and bury them in summer? You'd have to wait for the ground to thaw if you wanted to use it impulsively in winter.
--
Chris Cowles
Gainesville, FL
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I don't want to live in Alaska, but come to think of it, it might be a good idea to bury them there. Then, if I wanted to use one impulsively I would have to travel to Alaska to get it.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Hi:
I believe that you can safely cancel the credit card. While, I will not claim to be an expert on the credit scoring model, you do have other credit cards which you probably use now and then. The usage of these cards will allow you to maintain a good credit score.
BRH wrote:

Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Since this is a financial planning newsgroup and we get this question frequently, I'd like to throw my $.02 in.
I believe that living within one's means is the beginning point for all good personal finance, and that nothing starts to work until a person does it. Debt (unpaid balances at month-end) is evidence that a person is not living within their means.
Yet many consumers worry about their credit rating - it's as though they are intentionally planning to go into debt. I realize that many people don't see debt this way (which to me explains why most folks never become financially successful) - but it does not excuse the practice.
One way or another we are all involved in products, services, etc., but I consider our failure to stress good personal finance (and avoidance of debt) a black mark on our professionalism.
-HW "Skip" Weldon Columbia, SC
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
HW "Skip" Weldon wrote:

I agree with this. My advice had nothing to do with maintaining or improving the OP's credit score, although that is a nice side benefit.
In the case of the OP, it was a credit card he never uses, so clearly this is not one that has an unpaid balance at the end of the month.
The risk of mis-use? This is where I disagree with the other replies. The difference in vigilance required between three credit cards, and three credit cards plus a fourth one never used, is not very big, I know from direct personal experience. How is the card going to be compromised if he never uses it and has it locked up in a safe place? (beyond the risk that *all* cards carry of the issuing bank's database being compromised). Besides, most major cards provide a variety of additional security features, such as virtual card numbers, paperless statements, extra PIN codes for on-line purchase, e-mail alerts, and so on. Set these up once, and then don't lose sleep over it.
Another useful technique: card "crop rotation". Use one card exclusively for a month, then let it lie fallow while you use a different card the next month. This makes it much easier to reconcile your monthly statement even with multiple cards, since you know any off-cycle charge on a given card is suspicious.
Finally, and here is the key: it's much better by far to have credit available, and not use it, than to need it and not have it. Once you've already incurred the overhead of obtaining a card (including employment information), you might as well keep it, used or not. As for total open card accounts, three to five is a good range, one both the OP and myself easily fit into.
-Mark Bole
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
HW "Skip" Weldon wrote:

I knew there was a quote that reflected your thoughts;
"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery."
From David Copperfield (by Charles Dickens) 1849
JOE
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

:-)
Here's another gem, by British author Anthony Trollope of the same era:
"And the happiness of a household depends so much on money." -- Mrs. Thompson, _The Chteau of Prince Polignac_, Anthony Trollope, 1859.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
"HW "Skip" Weldon" wrote:

Using your simple definition of debt above, I'm not living within my means because I play and profit from rewards credit cards and the 0% BT game. Appearances can be deceiving, though.
I live well within my means, proceeds from the BTs are tucked away earning 5+% interest while I make the mininum monthly payment until full payback is due, the machine to meet my retirement goals has been churning away on autopilot for over 25 years (I'm well past my goals now), and my credit rating is pristine with a high credit score.
I do realize that my story is not the norm, though, and I don't recommend my little credit card hobbies for everyone. I wouldn't say I worry about my credit rating or score, but I do check it periodically to make sure it stays healthy.
Unfortunately, worry about one's credit rating can't be limited to plans to go into debt. In the last 5 years, I've changed jobs 3 times (long story about lay-off from one employer and retirement from another). Each new employer checked my credit rating. Last summer I changed insurers for my house. The new carrier checked my credit rating.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I do the same thing, and just paid back > $20,000 borrowed without interest for 1 year. The profits are in the MMF where I had stashed it. Those offers aren't so common anymore, with interest rates a little higher.
--
Chris Cowles
Gainesville, FL
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On the other hand, there is something about using other people's money to work for you. I'm not money oriented or anything, but let's say you get a $20,000 card, with a 0% balance transfer offer for two years, without a transfer fee (or a maximum transfer fee of $75, though the cards have started increasing this now). I take this offer, set up automatic payments, keep a tab on when it needs to be paid off, and then transfer it to a savings account which gives me 5% interest. That's $2000 extra dollars for two years for what I consider close to zero effort (and I'm a busy person). In today's climate, depending on your income and credit score, you can easily go ten times that amount. I can tell you that I get more offers in a given week than I have time to deal with.
Now you would argue that's a recipe for disaster for most people in the sense that they'd misuse the $20,000 (or x10 that number). I can understand that point (in the sense that people misuse/abuse alcohol/drugs, gamble too much, etc.). So it's a question of discipline and self-control. There's also a risk factor (in the sense you miss a payment and they jack the interest rate to 35%), but again, it's about keeping tabs and being able to pay off the balance in full when necessary. But until then, you're making 5% interest from the card companies (which is of course being paid for by people who don't manage their credit wisely).
I think both options need to be presented, but also is a function of the personality of the individual involved.
--Ram

Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Judicious use of debt is a good way to improve your standard of living through leverage. Businesses that finance projects through debt gain by maximizing return on investment, assuming the cash flow of the investment supports the debt. The same can be said for individuals, as long as (in my opinion) the debt is for assets that outlast the debt, it's a reasonable proportion of their wealth, their income is predictable, and they have plans to manage the debt should their income change.
Note that the first word in my reply is "judicious".
--
Chris Cowles
Gainesville, FL
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Not likely. I see folks "supersizing it" with the McBurger and McFries at the local McDriveThru. Hardly lasts 10 minutes.

Not likely. Average income? What ... on the order of $40K? Average CC debt? On the order of $9K. Do the math. That ain't "reasonable" by anyone's definition.

Maybe ... but increasingly rare.

Not on your life. Average Joe American doesn't have plans for what he'll make for dinner, let alone what he'll do for debt management.

Judicious and credit card debt just don't match up with the average American.

No. The same can't be said for individuals.
Businesses finance *production*. Individuals finance *consumption*.
See the difference?
.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

And this has what to do with the topic? You mean using credit cards to pay for a meal at McDonalds? I do it all the time, and pay it off at the end of the month. So what? Do you assume that everyone who buys consumer products with a credit card is wallowing in outrageous debt, a bankruptcy waiting to happen?

And I do not condone that. My statements refer to individuals with debt that IS a reasonable proportion of their predictable income. If you think a reasonable proportion is and always will be zero, we never will agree. Please be clear on that point so I can avoid the argument.

I, personally, feel rather secure. My wife and I both hold salaried positions in separate large healthcare organizations. I've survived 3 rounds of layoffs over the past several decades. We easily could work for the same employer but make a point of not doing that, purely to mitigate risk to our family income. There is risk in employment, just as there is risk in investment. You have to manage it.

Again, you describe what you believe is how Average Joe American handles his money. I have no idea what you consider average, nor do we have to agree that they handle it correctly or not. My statements apply to people to DO manage debt with intelligence and balance.

Again, 'average American'. Again, I'm not opining about whether an Average American handles debt properly. Only that debt, handled properly, is not evil and can be advantageous.

Individuals use debt to help with cash flow. If it's beneficial for me to have a tax-deductible mortgage on a home that reasonable advisers agree is within my means, and I invest the cash that I would otherwise have to have paid to buy the house outright, I'm financing "consumption" (housing) by your definition, why would I not do that? Is debt to be avoided at all costs, including reducing my future net worth? That doesn't make sense.
--
Chris Cowles
Gainesville, FL
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here. All logos and trade names are the property of their respective owners.

Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.