Video Mailbag Episode 4: Should I close my credit cards when they're paid-off?

Written by
Peter Dunn

Hey Pete,

What is the best way to settle credit card debt? I want to pay it all off so I can get my credit in better shape, and when I do pay it off I do not intend to use the cards again. Should I keep the cards open or should I close them?



Thanks for the question Ryan. People who are obsessed with credit scores would tell you to keep your cards open because of how closing them will impact your credit score. I don't care about credit scores so I say close them. I'm much more concerned with changing your behavior. Keeping cards open, especially if you have a history of keeping a balance, is just asking for trouble. Closing the cards not only prevents overspending, but it also forces you to create an alternative backup plan. Building an emergency fund becomes your top priority because you no longer have a credit card to fall back on. This is a good thing.

BUT, all that being said, there are two situations in which closing your card isn't a good idea. If you plan to buy a home or a car in the next year, don't close the cards. Closing cards does ding your score, and unfortunately it's enough of a hit to impact the interest rate you could get on your big purchases. I agree, it is stupid, but that's the way the credit bureaus work. If this is the situation you find yourself in, do yourself a favor and cut up the cards to prevent further spending even though you have to keep the accounts open longer than you want to.

Do you have a question? Cool, hit me up at

Check out the rest of my video mailbag series here.

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