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A reader recently posted this question on the Money Talks News Facebook page…
My new husband and I take full advantage of our credit card rewards by paying our balance twice per month, being careful to keep our debt-to-credit ratio well below 30 percent.
My problem is my husband’s old credit card only has a $750 limit. (He had HORRIBLE credit when we met.) It charges $5.99 a month for some sort of credit score watch (we get an updated “report” quarterly) and a $35 annual fee. We use this card for nothing, and I would like to cancel it. How much of a ding will our scores take? My credit score is 795, and his is up to 687.
Thanks for the question, Victoria, which is one I hear often. Here’s your answer…
Between the annual fee and the monthly “credit score watch” charge, your husband is paying more than $100 a year for a card with a minuscule credit limit. Therefore, I would agree he should cancel his card.
But will this hurt his credit? By itself, it might hurt a bit.
You’re very conscious about keeping your credit utilization ratio (aka debt-to-credit ratio) low by paying off your cards twice a month. At the same time, you should consider the credit part of that equation – by making sure that your husband has more credit extended to him before he cancels the existing card.
Fortunately, his once-poor credit is now in the range of average to good. Therefore, he should qualify for a card with no annual fee. I’d recommend a card like the Chase Slate. It has no annual fee and should be available at his credit level. Another card worth considering is the Simplicity card from Citi. It also has no annual fee and no late fees or interest rate hikes if you miss a single payment.
Victoria, you’ve done a great job helping your husband improve his credit score. Now is the time to make that crucial decision to find a better credit card. You’ll both save a lot more than it’ll cost you in a minor credit-score hit.