Is Dust on Your Credit Card a Bad Thing?

Some debt-laden consumers go to extremes to let their credit cards cool off. Quite literally. Some exile their cards in an icy "lock box" in their freezer. It's believed that in the time it takes the ice to melt, the urge to spend will have passed. That's usually a fix for someone who can't easily control their charging. But what about those consumers who put a figurative freeze on credit card debt?

[See 10 Signs You Shop Too Much.]

Some consumers routinely let their credit cards gather dust. They're comfortable walking around with cash or they use debit cards, saving credit accounts for emergencies and the occasional plane ticket or hotel room. Their resolve is admirable, as allowing revolving balances to swell, often at much higher interest rates than on other loans, can strain household finances. High balances jeopardize the high credit ratings needed to secure attractive financing on life's big demands, like a home purchase.

But as anyone who's ever tried to decode their credit report knows, all credit cards are not created equal.

For starters, having a respectable amount of credit history is important. Accounts that carry modest balances and robust upside borrowing limits will earn favorable points. That's because the consumer has not only proven their reputation for paying their bills, they're viewed as having credit wiggle room in a financial pinch, which will help them keep up with their bills.

[See 6 Benefits and Rewards of Having Awesome Credit.]

But one of the first distinctions the consumer (and the lender, for that matter) should make is to determine if a credit account is active or inactive. Here's where card-use frequency can really make a difference.

If a consumer carries no balance and pays only a small or nonexistent annual fee, the issuing company makes no money. When a consumer uses the card and pays it off before interest kicks in, the issuer still collects an interchange or "swipe" fee from merchants. No balance and no fees mean the issuer is paying to maintain the account and it's generating marketing expenses as it tries to woo the consumer with increased limits or other promotions. An issuer will do this for some time, but eventually consumer inaction will cost the issuer too much and it will close the account (If an issuer cancels an account due to inactivity, notification to the cardholder isn't required, according to the Equal Credit Opportunity Act.) As a result, the approved but unused credit limits that worked to drive up a credit score disappear.

Particularly damaging is when consumers close accounts they've paid off even while they continue to work down what's owed on their remaining high-balance card or cards.

Here's how it works: Fewer accounts on record and a lower overall approved borrowing limit pushes up the consumer's revolving utilization percentage. Utilization reflects the debt-to-credit limit ratio on revolving accounts.

[See 6 Surprising Ways to Boost Your Credit Score.]

A spike in this reading can be a drag on the credit score. Granted, utilization is only one figure used to calculate the amounts-owed portion of a credit score, but it's an important one. Overall, the amounts-owed factor counts for about 30 percent of a score, according to FICO, one of the original credit-scoring companies. (The company name has become synonymous with the score itself; credit scores are often called FICO scores. They're issued through consumer reporting agencies, including Equifax, Experian, and TransUnion.)

There's a solution, but one that shouldn't be treated recklessly. Simply use all cards from time to time to keep them active. That's right, blow of the dust. Just try to pay that balance before the interest kicks in; making minimum payments can get a little too comfortable.

Sometimes consumers tire of a little-used card. They don't like the marketing solicitations. They worry about misplacing the card or having too many account numbers vulnerable to theft.

But closing credit card accounts should be given careful thought. If bad credit marks on a report go away in around seven years, so do strong track records. That means open accounts are necessary for feeding a credit score over time. And, hey, if you don't trust yourself, there's always the freezer.



More From US News & World Report

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • Gold hits one-week low as dollar firms
    Gold hits one-week low as dollar firms Reuters - 6 minutes ago

    Gold inched lower on Wednesday to touch a one-week low, after suffering its biggest single-day loss in nearly a month in the previous session, on a firmer dollar. The safe haven asset slid nearly 1 percent on Tuesday, its biggest single session … More »

  • SE Asia Stocks-Vietnam hits 8-1/2-year high; Philippines up Reuters - 9 minutes ago

    By Suhail Hassan Bhat Sept 28 (Reuters) - Vietnam shares hit an eight-and-a-half-year high on Wednesday, led by commercial banks, while Philippine stocks rose after three sessions of falls with financials ... … More »

  • Toshiba revises up first half forecast on solid memory chip sales
    Toshiba revises up first half forecast on solid memory chip sales Reuters - 33 minutes ago

    Japan's Toshiba Corp said on Wednesday it expects to post a bigger first-half profit than previously forecast as memory chip prices have climbed on rising demand for smartphones. A Toshiba spokesman said that the upward revision mainly reflects … More »

  • Oil stages weak rebound as hopes ease for output deal AFP - 46 minutes ago

    Oil prices posted marginal gains in Asia Wednesday as an industry report showing a decline in US stockpiles was offset by worries about the chances of this week's key producers meeting ending with a deal ... … More »

  • Abe Clashes With New Opposition Leader Over BOJ Inflation Policy Bloomberg - 48 minutes ago

    Renho, the leader of the main opposition Democratic Party, described the new framework from the central bank on Sept. 21 as an admission that the limits of monetary policy were being reached. Abe said he would continue to work closely with the … More »

  • The World's Most Innovative Universities - 2016
    The World's Most Innovative Universities - 2016 Reuters - 54 minutes ago

    No university does that better than Stanford University, which once again tops the Reuters 100. Decade after decade, Stanford’s students and faculty consistently innovate. Companies founded by Stanford alumni – including Hewlett Packard and Google … More »

  • Postal Savings Bank of China makes flat Hong Kong debut after $7.4 billion IPO Reuters - 58 minutes ago

    Shares in Postal Savings Bank of China (PSBC) made a flat debut in Hong Kong after the state-owned lender raised $7.4 billion in the world's biggest initial public offering in two years, priced the deal near the bottom of its marketing range. … More »

  • Exclusive: Permira nearing deal to buy Bank of East Asia's Tricor unit - sources Reuters - 59 minutes ago

    Private equity firm Permira has emerged as the preferred bidder to buy Bank of East Asia Ltd's share registry unit Tricor Holdings for between $750 million (576.97 million pounds) and $800 million, sources said on Tuesday, after six months of … More »

  • Asia stocks edge down on Europe bank woes, lower oil
    Asia stocks edge down on Europe bank woes, lower oil Reuters - 1 hour 4 minutes ago

    Asian stocks were mostly lower on Wednesday, with European banking sector concerns and lower crude oil prices dulling investors' appetite for riskier assets. Equities in Asia had gained the previous day on a perceived win by Democrat Hillary … More »

  • Wells Fargo claws back part of CEO, other executive's salary Associated Press - 1 hour 8 minutes ago

    Wells Fargo says CEO John Stumpf and the executive who ran the bank's retail banking division will forfeit tens of millions of dollars in pay as the bank tries to stem a scandal over its sales practices. ... … More »

  • Asian stock markets turn lower after Wall Street gains
    Asian stock markets turn lower after Wall Street gains Associated Press - 1 hour 8 minutes ago

    Major Asian stock markets were lower Tuesday after investors were reassured by trade-friendly Hillary Clinton's performance in a U.S. presidential debate with rival Donald Trump. KEEPING SCORE: Tokyo's ... … More »

  • Endurance Tech sets price band for up to $175 million IPO
    Endurance Tech sets price band for up to $175 million IPO Reuters - 1 hour 8 minutes ago

    MUMBAI (Reuters) - Endurance Technologies, an Indian auto parts maker, has set a price band of 467-472 rupees a share for its initial public offering of shares next week that could raise as much as 11.61 ... … More »

  • How Buffet Restaurants Trick You Into Thinking That You Are Getting A Great Deal DollarsAndSense.sg - 1 hour 10 minutes ago

    Consumer behaviour and cost efficiency are how buffet restaurants make money. The post How Buffet Restaurants Trick You Into Thinking That You Are Getting A Great Deal appeared first on DollarsAndSense.sg. … More »

  • Tokyo shares drop by break on dividend payments AFP - 1 hour 11 minutes ago

    Tokyo shares fell Wednesday morning after the previous day's rally as more than half the firms on the Topix index traded without the right to a September dividend payment. A strong yen also hit exporters, ... … More »

  • Toshiba More Than Doubles Profit Outlook as Yen Drives Sales (1) Bloomberg - 1 hour 14 minutes ago

    Toshiba, which makes everything from computers to nuclear power equipment, in August reported its first operating profit in six quarters. “Apple’s recent upgrades to its smartphone embedded memory have also helped Toshiba’s cause,” Amir Anvarzadeh, … More »

  • Malaysia's closing tin prices for Sept 28 Reuters - 1 hour 20 minutes ago

    KUALA LUMPUR, Sept 28 (Reuters) - Following is a table of Kuala Lumpur tin market prices provided by a Malaysian trader. (Prices in $/tonne, and volumes in tonnes unless stated) Date KL Premium/ Spot Bid ... … More »

  • Two Goldman Sachs Asia Partners Said in Discussions to Leave Bloomberg - 1 hour 29 minutes ago

    Asia Pacific Investment Banking Solutions head Anthony Miller is planning to depart the bank after 15 years with the firm, and Michael Smith, head of Southeast Asia and another Goldman partner, is also in talks about leaving, people familiar with … More »

  • Asian markets down, energy firms hit by oil deal woes
    Asian markets down, energy firms hit by oil deal woes AFP News - 1 hour 36 minutes ago

    Tokyo stocks led a retreat in Asian markets Wednesday as the yen recovered, while regional energy firms struggled with crude prices on concerns about the chances of success at an upcoming producers meeting. … More »

  • 10 Ways to Maximise Your Closet Space
    10 Ways to Maximise Your Closet Space The Edge Property - 1 hour 40 minutes ago

    Source Weekday mornings usually find us scampering across our room and raiding our closets until we find the outfit we want for the day. For the organised one, this shouldn’t be a problem—clothes are neatly lined up and folded immaculately that it’s … More »

  • China economy seen growing 6.6 percent in fourth quarter - government think tank Reuters - 1 hour 54 minutes ago

    China's economy is expected to grow at an annual 6.6 percent in the fourth quarter and post overall growth of 6.7 percent for the full year, the China Academy of Social Sciences (CASS) said. The predictions by CASS, a top think-tank that advises … More »

  • Cisco plans $4 billion worth of expansion in Mexico - government
    Cisco plans $4 billion worth of expansion in Mexico - government Reuters - 1 hour 59 minutes ago

    U.S. networking equipment maker Cisco Systems Inc (CSCO.O) plans more than $4 billion worth of expansion in Mexico between 2016 and 2018, the Mexican government said on Tuesday. Cisco's Chief Executive Officer Chuck Robbins made the announcement … More »

  • Need to address non-tariff barriers within Asean Business Times - 2 hours 8 minutes ago

    ADDRESSING non-tariff barriers (NTB) in Asean still has a long way to go, and member countries must first work on key people-centric focus groups in order to start progressing, said Asean Business Advisory Council Malaysia chairman Tan Sri Dr Mohd … More »

  • Satellite Pipeline inks technical deal with AWS Schäfer Business Times - 2 hours 9 minutes ago

    BERLIN: Satellite Pipeline Sdn Bhd has tied up with German pipe machine leader AWS Schäfer Technologie GmbH to start a steel and pipe heat induction bending workshop in Pahang. The long-term technical joint-venture agreement marks the first of … More »

  • Citizens, govt and businesses play role in city's transformation Business Times - 2 hours 9 minutes ago

    MAKING a city a liveable space involves the citizens, the government and businesses and requires small and multiple meaningful projects for the transformation, said Think City Sdn Bhd executive director Hamdan Abdul Majeed.   “Cities can … More »

  • 'No changes to GST in near term' Business Times - 2 hours 9 minutes ago

    THERE will be no changes to the Goods and Services Tax (GST) in the near term as the government aims to embed the tax system into entire consumer spending system, said Finance Minister II Datuk Johari Abdul Ghani. “GST and the subsidy … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.144+0.003+2.13%
    N21.SI
    0.144+0.002+1.41%
    5DM.SI
    0.215+0.026+13.76%
    I07.SI
    0.320.00+1.59%
    5OT.SI
    3.97-0.02-0.50%
    Z74.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.15+0.02+15.38%
    RF7.SI
    0.24+0.03+14.29%
    BQN.SI
    0.215+0.026+13.76%
    I07.SI
    0.495+0.045+10.00%
    T55.SI
    0.47+0.03+5.62%
    P19.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.112-0.028-20.00%
    BEH.SI
    0.225-0.035-13.46%
    40D.SI
    1.025-0.065-5.96%
    P01.SI
    0.38-0.02-5.00%
    AWE.SI
    0.114-0.005-4.20%
    B9S.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3597+0.0002+0.01%
    USDSGD=X
    1.5241-0.0008-0.05%
    EURSGD=X
    1.7681-0.0021-0.12%
    GBPSGD=X
    73.9940+0.138+0.19%
    SGDJPY=X
    5.7013-0.001-0.02%
    SGDHKD=X
    3.0385-0.0005-0.02%
    SGDMYR=X
    9,509.0166-19.4365-0.20%
    SGDIDR=X
    4.9049-0.0006-0.01%
    SGDCNY=X
    1.0437+0.0015+0.14%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,329.00-1.40-0.11%
    GCZ16.CMX
    19.11-0.05-0.26%
    SIZ16.CMX
    92.98-1.47-1.55%
    ^XAU
    2.170.00+0.05%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.11-0.02
    ^FVX
    1.56-0.03
    ^TNX
    2.28-0.05
    ^TYX