Cancel credit card ?

[George]

They just don't like as as much. Since they are still inserted into the transaction they get to collect the non-trivial merchant fees which the merchant is not allowed to display.

[Jim Elbrecht]

Well explained. I have a 8-10 Chase cards. If they want to pay me to open a card-- I open it. I use it once- pay it off, get my bonus, and throw it in the safe.

A couple weeks ago I got 3 letters from Chase in the same mail.

1. You don't use this card- so we're closing it. [a 00 limit]
2. You don't use this card, so we're closing it. [another 00 card]

Now I'm getting concerned that they have decided to lower my available credit by $9000. [not because I would use the cards- but because of the credit score] I was sure the 3d was the same thing as I have several other cards I don't use.

Nope-- The 3d letter-- A review of your credit history tells us this card will be the best fit for you. If you choose to use it we will credit your account $100 30 days after its first use. Credit limit $10,000.

Thanks Chase.

Jim

[George]

quoted text -

And what does it really matter? To get an uber good credit score you have to totally run your financial life their way. Don't plan for any purchases by saving, buy things you can't afford and carry a balance but just make sure you pay it on time.

[George]

But your statistical sample period is way to small to catch the period not too long ago when it was a good thing to not even have a budget. Just simply buy what you wanted because somehow it would work out.

[willshak]

Higgs Boson wrote the following:

Don't cancel it.

[Tony Miklos]

The lenders are OK with it, they already have their percentage from the store where you used the card. They make money either way. They make less my way, but they also see a responsible person who they doubt they will ever have to chase down to collect the debt.

[Jim Elbrecht]

Zackly-- I haven't paid any CC interest in a decade. They pay me about $100 a month in rewards. My credit is excellent- I don't know the numbers, I just see the dealer's face light up when I go for a car loan.

Jim

[Tony Miklos]

Great! You get your bonus again!!!

[The Henchman]

The lenders are OK with it, they already have their percentage from the store where you used the card. They make money either way. They make less my way, but they also see a responsible person who they doubt they will ever have to chase down to collect the debt.

---------------

Yeah I see your point. If a credit card issuer issues enuf cards and gets those customers using them at merchants, the issuer earns a profit when it collect merchant fees even if they never see a penny in borrower interest. That's a good point.

But from the aspect of a borrower's credit score, lenders making money from merchant fees is a non-factor when calculating a score. Your credit score is influenced by a lender's ability to collect borrowed money with interest, not on the ability to collect merchant fees.

[Jim Elbrecht]

Juggling 4 cards, I get [this quarter]

5% on gas, 3% on Amazon, 5% 'in a grocery store' , 1-2% on anything else--- plus all the 'we're dying to have you as a customer' bonuses. If it is over $20, I'll bite. I've gotten $100 several times, $50 is common.

They slowed down for a while- but the past few months have picked up again.

Jim

[Josh]

No, it's not (or at least it's not supposed to be). Your credit score is (theoretically) a measure of your credit-worthiness (the likelihood you won't walk away with the money) based on your past payment history, usage, and credit availability from the data on your credit report.

I just pulled my Transunion report, and nowhere does it indicate whether I've paid interest -- all of the balances are the most recent month's purchase total and per-month "OK"s; no way to tell whether it was paid in full or something lower.

Your income doesn't even factor into your credit score (it's not on your credit report). Lenders do, obviously, ask for (and sometimes verify with paystubs etc) income, and use that to set your actual credit limits, but that's separate from the score.

Now, I wouldn't be surprised if some card companies used your history carrying a balance/paying interest *with them* to decide whether to keep or drop your card, but I've never had that happen.

Josh

[Vic Smith]

Lots of apples and oranges. My reading of the debt/credit ratio component of FICO scoring is the debt part is based on revolving credit balance. So if you don't carry a balance the ratio is always sterling. And even if you occasionally carry a balance, since FICO is periodically recalculated, having useless credit cards around is senseless, especially if they are sending you zero balance bills and adding to the junk mail.

Much of this FICO stuff is lender and CC scamming. They want you to keep the card so they get transaction fees. FICO is a decent tool for creditors, but way too much of it made for those who pay their bills on time and use their CC's as a convenience, and not as a loan machine Of course the FICO algorithms are "trade secrets."

You're right about the debt/credit ratio having a FICO score effect for those with revolving credit balances. But you can't say how much. That factoring is a "secret." Good way to scare those folks to get more credit cards, get into more debt, and ultimately increase the already usurious interest rates on their cards.

When I got my mortgage in 1997 my mortgage broker told me to cancel unused cards. I had a hefty balance on one card. And a couple other unused cards with high limits. According to him the lenders didn't like all the "available credit." So FICO was only one criteria they used. Of course lenders had a sense of fiduciary responsibility then. Similarly, insurance companies use a modified "insurance FICO" to assign risk and determine premiums - some of them don't use FICO at all. It's all "trade secrets" of course.

No question that you don't want a poor FICO score. And you want to avoid felony convictions too. But for the average Joe who pays his bills on time and doesn't carry a CC balance, you don't have to worry about it. Certainly not enough to listen to bankers threatening your FICO score if you don't keep their credit card.

--Vic

[Vic Smith]

Interesting. Maybe I shouldn't have said what I said about it not affecting the credit/debt ratio if you pay in full each month. According to what you said they just use the balance at the time they do the report. Makes sense for easy accounting. Still not convinced that the Transunion and other reports have everything that go into developing the FICO. So much of the whole apparatus is "secret."

One simple way to get an idea would be to get your FICO score, then without changing other habits, add a credit card. Then get your FICO score again. But you have to pay for your FICO score unless you go about it by having somebody who can pull it for you. Of course that's a "hit" against your FICO score! Sweet deal they got going.

But I still say that worrying about the FICO score is immaterial for those not deep in debt and paying bills normally. For those the score is going to be good enough not to affect any thing they do. But I'm guessing - because the algorithms are secret. And I haven't taken out any kind of loan in many years, except mortgage refis. Always got terrific rates on those.

--Vic

[Tony Miklos]

Ahhhhh, no. I just checked my credit score and there is no way I'd get a score so high if it depended on collecting interest. No way at all.

But I do have 0 negatives and 17 accounts in good standing.

[Kurt Ullman]

I get a real kick out of the commercials for the credit score "monitoring" people. They keep an eye "on all three of your credit scores", while the one used most often and probably the most important (the FICO) isn't included. Is to guffaw.

[Vic Smith]

A lot of it is a dice game. The HELOCs are variable rate, so unlike the fixed you have to be able to pay it off if rates jump. If you can do that it's a good play I had a zero balance HELOC for a while as a safety when my job looked dicey and my mortgage principle was still high. I could use it to pay my mortgage if I was out of work. Luckily never had to use it. But it never came close to beating my fixed, or even my variable rate mortgage when I refied. But the HELOC was prime +2.

--Vic

[Jim Elbrecht]

-snip-

Yup- I got that one. I read that letter 3 times, on three different days because I was sure there was a hitch. I got 20K & set up an auto-payment from my bank-- and paid my $5/mo AOL account, and a $2/mo website. Seems like it was a 5yr payback or so-- not bad for $7/mo, even if I wasn't using those 2 accounts.

If Discover hadn't been such pricks with all the solicitations over the next month I would have been their friend for life. It took some major threats and a talk to a 2nd level supervisor to convince them that I wasn't buying anything else. And never will. [though I've been tempted by their 5% gas reward card]

Jim

[mkirsch1]

That's a double-edged sword too.

If you don't use the card, they start dropping the credit limit on the card, which hurts your credit score too.

[krw]

You listen to the Nightly News too much. The situation has bettered somewhat, but it wasn't just all of a sudden that almost half of the people paid off their CCs. Not everyone maxed out on their home equity, either.

[krw]

Complete bullshit.

1. The CC company isn't the one creating the "score".
2. They still make the transaction fee.

I'd be happy with 5% of the DGP. So happy that I'd even give you 1%.