Don’t cancel that credit card!

When you consider the interest rates you’re paying on your credit card debt, it’s natural to think that the best financial decision you could make would be to simply cancel it (or them, if you’ve got several).

Don’t be too hasty though!

Here’s the thing: credit card debt is expensive, for sure, and paying off your balance is a good thing. In fact, it’s better to pay off credit card debt than it is to save. But once you stop carrying a balance, there are some very good reasons to hold on to your card. For example, it shows commitment to banks and credit bureaus while keeping your debt to credit ratio low, both of which will improve your credit score.

That’s not to say that owning 20 credit cards is a good thing: anything over 7 will probably start to hurt your score.

The Motley Fool have a great article about this subject that you really should read: http://www.fool.com/personal-finance/credit/dont-cancel-that-credit-card.aspx

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