Managing Credit

Cutting Up a Credit Card and Your Credit Score

Cutting Up a Credit Card and Your Credit Score

We've all been there: After finally paying off a credit card balance, you want to vindicate your hard work by closing the account and then cutting the card in two. It makes sense. Why keep a card around that may tempt us to spend more than we'd like again?

While closing your account and cutting up credit cards might make us feel more on top of our finances, it's not necessarily therapeutic for your credit score. Even cards that you don't use anymore and carry sky-high interest rates can help your credit score. And here's why:

1. Old credit lines boost your score.

The more history you have as a borrower, the better your credit score should be. (Your credit score is a three-digit number, which the three main credit bureaus calculate based on your past payment history, that lenders and creditors use to determine whether you'll pay them back on time.) Even though you may no longer use the credit card you opened in college, closing the account entirely could negatively affect your profile as a borrower. Closing your oldest accounts makes you look like a newer borrower, says Wayne Sanford, a credit expert in Dallas and author of "The Real World on Credit."

2. Closing accounts can hurt your debt ratio.

Credit scores are determined, in part, by your debt-to-credit ratio. Make no mistake, paying down your credit cards is a good thing, but closing the account entirely could possibly lower your score.

Say, for instance, you have two cards with a $1,000 limit on each card. If one card has a $500 balance and you just paid the other card down to zero, your debt-to-credit ratio is 25% because you hold a $500 balance out of $2,000 possible credit. If you close the paid-off account, your ratio will spike to 50 percent because you'll have eliminated $1,000 of possible credit.

"I once had a client who wanted to close down a retailer retail credit card because it had a 43 percent interest rate," Sanford says. "She was trying to do the right thing by closing it, but it would have had a negative effect on her score."

The alternative

Rather than closing your account and taking the scissors to your credit card, consider using it to meet your monthly budgeting goals—and rack up rewards points in the process. One way is to use a credit card consistently for "everyday spending" such as groceries, gas and other routine expenses. Then, avoid interest payments by paying off the balance each month.

Russ Ferguson, an attorney in Charlotte, N.C., uses credit cards as often as possible because they allow him to accumulate rewards.

"To use cash is to throw money away," he says. "The points you get for every credit card purchase are worth real money and they add up quickly."

But Ferguson cautions: It's important to be meticulous about how much money you're spending, so you don't exceed your budget. Still, the time spent tracking, he says, is well worth the payoff.

"I have a card that gives me five-times points at restaurants and a different one that gives me five-times points at gas stations and grocery stores. I choose which card to use based on what I am purchasing."

Understand Your Credit Score

Looking to improve your credit score? Start here.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


Investment and Insurance Products:

Are Not FDIC or any other Government Agency Insured   Are Not Bank Guaranteed  May Lose Value 

© 2018 SunTrust Banks, Inc

equal housing logoSunTrust Bank is an Equal Housing Lender. Member FDIC

equal housing logoEqual Housing Lender. SunTrust Mortgage, Inc

SunTrust, SunTrust Mortgage, SunTrust PortfolioView, SunTrust Robinson Humphrey, SunTrust Premier Program, AMC Pinnacle, AMC Premier, Access 3, Signature Advantage Brokerage, Custom Choice Loan and SunTrust SummitView are federally registered service marks of SunTrust Banks, Inc. All other trademarks are the property of their respective owners.

Services provided by the following affiliates of SunTrust Banks, Inc.: Banking products and services are provided by SunTrust Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank, SunTrust Delaware Trust Company and SunTrust Banks Trust Company (Cayman) Limited. Securities, brokerage accounts and insurance (including annuities) are offered by SunTrust Investment Services, Inc., a SEC registered broker-dealer, member FINRA, SIPC, and a licensed insurance agency. Investment advisory services are offered by SunTrust Advisory Services, Inc., a SEC registered adviser. GFO Advisory Services, LLC is a SEC registered investment adviser that provides investment advisory services to a group of private investment funds and other non-investment advisory services to affiliates. Mortgage products and services are provided by SunTrust Mortgage, Inc.

SunTrust Mortgage, Inc. - NMLS #2915, 901 Semmes Avenue, Richmond, VA 23224, 1-800-634-7928. CA: licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, IL: Illinois Residential Mortgage Licensee #MB-989, Department of Financial and Professional Regulation, 100 W. Randolph, Suite 900, Chicago, IL 60601, 1-888-473-4858, MA: Mortgage Lender license #-ML-2915, NJ: Mortgage Banker License - New Jersey Department of Banking and Insurance, NY: Licensed Mortgage Banker—NYS Department of Financial Services, and RI: Rhode Island Licensed Lender.

"SunTrust Advisors" may be officers and/or associated persons of the following affiliates of SunTrust Banks, Inc.: SunTrust Bank, our commercial bank, which provides banking, trust and asset management services; SunTrust Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; SunTrust Advisory Services, Inc., a SEC registered investment adviser which provides Investment Advisory services.

SunTrust Private Wealth Management, International Wealth Management, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups and GenSpring are marketing names used by SunTrust Bank, SunTrust Banks Trust Company (Cayman) Limited, SunTrust Delaware Trust Company, SunTrust Investment Services, Inc., and SunTrust Advisory Services, Inc.

SunTrust Bank and its affiliates do not accept fiduciary responsibility for all banking and investment account types offered. Please consult with your SunTrust representative to determine whether SunTrust and its affiliates have agreed to accept fiduciary responsibility for your account(s) and if you have completed the documentation necessary to establish a fiduciary relationship with SunTrust Bank or an affiliate. Additional information regarding account types and important disclosures may be found at

SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries, including SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.