Canceling credit cards - insurance rate increase?
"You don't need to have a bunch of credit cards lying around; just a couple is fine. Get a ""rewards"" card (without annual fee) that pays you back for use, and use it regularly to buy groceries, for example. Pay it off promptly each month, using the rewards, if you like, to reduce the amount you have to send in. Or you can use the rewards for other purchases; some merchants offer $25 worth of merchandise for $20 in rewards. It used to be the case that you could negotiate a discount for paying cash rather than use a credit card, but that is a lot harder to do now, in many cases because credit-card company contracts with merchants prohibit this practice. Also, merchants often prefer credit cards rather than cash because money-handling is an issue (pay for an armored car to come pick up the day's receipts, or risk getting mugged on the way to the bank, possible burglaries if you leave the money overnight in the store, daily balancing of cash-register trays, etc.) So, not being in debt and being rich enough to not need to be in debt are laudable goals, and you have my best wishes that you will reach them soon, but getting rid of all your credit cards as a part of not being in debt may be more trouble than it is worth. Keep a couple, pay them off promptly, and if you are concerned about being in debt, you can time your charges so that you are in debt at  most 2 or 3 days each month." "The comments section to Dilip's reply is overflowing.  First - the OP (Graphth) is correct in that credit scoring has become a game. A series of data points that predicts default probability, but of course, offers little chance to explain why you applied for 3 loans (all refinancing to save money on home or rentals) got new credit cards (to get better rewards) and have your average time with accounts drop like a rock (well, I canceled the old cards).  The data doesn't dig that deep.  To discuss the ""Spend More With Plastic?"" phenomenon - I have no skin in the game, I don't sell credit card services. So if the answer is yes, you spend more with cards, I'll accept that. Here's my issue - The studies are all contrived. Give college students $10 cash and $10 gift cards and send them into the cafeteria. Cute, but it produces no meaningful data. I can tell you that when I give my 13yr old $20 cash, it gets spent very wisely. A $20 Starbucks card, and she's treating friends and family to lattes. No study needed, the result is immediate and obvious. Any study worth looking at would first separate the population into two groups, those who pay in full each month and those who carry a balance. Then these two groups would need to be subdivided to study their behavior if they went all cash. Not a simply survey, and not cheap to get a study of the number of people you need for meaningful data. I've read quotes where The David claimed that card users spend 10% more than cash users. While I accept that Graphth's concern is valid, that he may spend more with cards than cash, there is no study (that I can find) which correlates to a percentage result as all studies appear to be contrived with small amounts to spend.  As far as playing the game goes - I can charge gas, my cable bill, and a few other things whose dollar amounts can't change regardless. (Unless you're convinced I'll gas up and go joy-riding) Last - I'd love to see any link in the comments to a meaningful study. Quotes where conclusions are stated but no data or methodology don't add much to the discussion.  Edit - Do You Spend More with Cash or Credit? is an article by a fellow Personal Finance Blogger. His conclusion is subjective of course, but along the same path that I'm on with this analysis." Your credit score can be part of the algorithm for setting your rates for auto insurance. It is one of many factors including sex, age, zip code, driving record, type of car... There are some states that are concerned about using credit scores, some sates have passed legislation regarding this issue You can't ask insurers to use a particular score -- they have a state-approved underwriting model that they must follow consistently. Insurance companies make money by not paying claims, and poor credit score (including limit access to credit) increases the probability that you will file a small claim. Why? If you get into a minor accident (say $750 of damage) and have a $500 deductible, you are much less likely to file a claim to get $250 if you have access to a cash or credit lines to make the repairs yourself.  If you feel that you are going to be penalized for closing credit card accounts, the solution is simple -- don't close them. Other than an event where you need to sever a relationship with a co-owner of an account (ie, you break up with your significant other, dissolve a business, etc) or avoid paying an annual fee, there is no advantage to you closing a revolving credit account, ever. If you cannot control your spending, throw the card in the shredder. Eventually, the credit card company will close your account for inactivity, which affects your credit to a lesser degree. (The big exception is if you carry sufficient balances on other cards, your credit utilization ratio goes up materially.)
In the case of reward cards, different cards may offer different rewards for different kind of purchases. For example, in the UK, one of the Amex cards offers 1.25% cashback on all purchases, whereas one of the Santander cards offers 3% on fuel, 2% or 1% on certain other transactions, and nothing on others. Of course, you then have to remember to use the right card! Another reason is that a person may use a card for a while, build up a good credit limit, and then move to a different card (perhaps because it has better rewards, or a lower interest rate, etc) without cancelling the first. If it costs nothing to keep the first card, then it can be useful to have it as a spare. Short of canceling the card, you could just report the card as lost and ask for a new card number on the same account. Another option is to just make a note to look for the charge and keep disputing it. It has been a while since I did credit card processing at my business, but I think the company gets dinged if too many customers dispute charges and kicks them into a higher fee schedule with the credit card company. If you've got the money to pay off your credit cards, do it. Today, if possible. There is no need to pay another penny of interest to them.  They may or may not cancel your cards. That is up to them. We can't know what will trigger an individual bank to cancel your card. The answers you got on your other question offer some speculation on why some banks might cancel, but this is not something banks reveal. Anything you do on your own to try to keep the cards open is just a guess, and may or may not succeed.  But ask yourself: why do you want to keep these cards?  Is it for the convenience of the card? I agree that credit cards (paid in full monthly) are convenient, but when they start costing you money, they aren't worth it anymore, in my opinion. Debit cards have most of the same conveniences of credit cards, and are free.  If it is for emergencies, I recommend instead building up an emergency cash fund. That way, if an emergency arises, you won't be forced to borrow money at high credit card interest rates.  If the reason you want to hang on to the credit card is so you can spend more than you have, then you will find yourself in the same situation again. If I were you, I would pay off the cards ASAP. If the banks cancel your cards, just switch to a debit card and be thankful that you are no longer continuously leaking money to the banks. I'm not sure if someone else answered already in the same manner I will. I can't guarantee for sure if it's the same in the U.S.A. (it might since major credit cards companies like Visa/MC/AMEX are American companies) but in Canada having/keeping unused CC is a disadvantage because of the following: Banks and financing companies look more at the total amount of credit available to you than at how much purchases you have on your cards. Ex: Let's say that you have the following: - Visa cc with $10,000 limit and $2000 worth of purchases (made more than 30 days ago) on it. - Mastercard cc with $10,000 limit as well and $1000 worth of purchases (less than 30 days old) - A major retail store cc with $2000 limit and $0 balance. Hypothetical situation: You want a bank loan to do some expensive house repairs and are looking for a lower interest rate than what your cc can offer. The bank will not care about the amount on the cards. They will add-up all the limits of your cc and treat your loan request as if ALL your cards were filled to their respective limit.  So in this case: they will consider you as being right now in debt of $10K+$10K+$2K = $22,000 instead of only $3000 and they might:  1. refuse you the loan 2. grant it only if you transfer all purchases on a single card and cancel all the others. 3. Once the $3000 is transferred on one of the cards (and the others cancelled), they can require that you reduce the limit of that card. Hope this helps! There is plenty of over-rationalisation in the majority of these answers, when the simple answer is that it is simply down to statistics. Say an insurer had two pieces of information about two separate drivers: annual mileage, and whether they had had an accident in the last 3 years. Driver A drives 10,000 miles a year and hasn't had an accident in the past 3 years. Driver B drives 500 miles a year and hasn't had an accident in the past 3 years. Which would the insurer think was the safer bet? The answer is A, and this makes his premiums lower. The reason for this is that the insurer has a lot more data about Driver A than Driver B: they know that Driver A has driven 30,000 miles without having an accident. This could, of course, be luck, or a fluke, but it is likely that Driver A is actually a safe driver. The chance that Driver A hasn't had an accident just through sheer luck and that they are actually a terrible driver is quite slim. On the other hand, Driver B has only driven 1,500 miles in the past three years. Whilst this seems like prima facie evidence of them being as safe a driver as Driver A, it is much more likely that Driver B could have driven 1,500 miles and avoided an accident through sheer luck, even though they are a terrible driver.  This means drivers who drive low amounts of mileage will be penalised relative to other drivers who have high mileage. It has nothing to do with insurers taking a judgement that 'doing more mileage makes you more experienced' or 'makes you a better driver' as others have suggested here (although, it is probably true - it's not quantifiable from an insurer's perspective). "Speaking from personal experience: I have had a credit card canceled for exactly this reason. It's happened to me three times, with two different providers (NatWest and Nationwide). After the third instance I stopped bothering to even carry a credit card. It's worth noting that all three were ""free"" cards in the sense that I paid no flat fee or subscription to get the cards. The only way the issuer could make a profit on them was through interest. I was also not a frequent user, carrying the card for convenience more than anything else, although I did make purchases on all three. So it's certainly a possibility. But I live in the UK and I'm guessing most of your other respondents do not. It may be a practice that's more common here than in the US. That might even explain the origin of the rumour." "Discounting premiums based on some past history is not unique to auto policies.  Other insurers will discount premiums based on past claims history they just don't shout about it as a marketing means to attract customers.  Life insurance is underwritten based on your health history; if you want to consider your ""preferred"" underwriting status based on your clear health history a ""discount based on your healthy habits"" you're free to do so.  All sorts of lines of insurance use all sorts of things to determine an underwriting classes.  The fact that auto insurers trumpet specific discounts does not mean the same net effect is not available on other lines of coverage. Most states require auto rates and discounts to be filed and approved with some state regulator, some regulatory bodies even require that certain discounts exist.  You could likely negotiate with your business insurance underwriters about a better rate and if the underwriters saw fit they could give you a discount.  Auto insurers can offer discounts but are generally beholden to whatever rate sheet is on file with the applicable regulatory body. For the person who downvoted, here's a link to a spreadsheet outlining one of the CA department of insurance allowable rating factor sheets related to auto insurance." Hey I used to do this for a job.          having two separate policies is a bad idea. If you decide you need more life insurance just increase the one you currently have. There are usually discounts for having higher levels of cover. Not only that but if you have multiple policies all you're getting is the task of doing multiple claims and maybe some additional policy fees depending on which companies you're looking at.        What did you consider when deciding how much life insurance to take?