Photo (cc) by 401(K) 2012
A Money Talks News reader recently wrote me with the following question:
I’ve had some credit cards for approximately 5-10 years. I got them when I started to establish my credit after a pretty tough time of not managing my finances correctly. Out of the 13 cards I have, 5 carry annual fees – all from Capital One. I’ve tried to switch the cards, but they tell me I have to apply for the new cards with “no annual fees.” I’ve not missed a single payment on any of them in 5-10 years. But, they unfortunately are the ones I’ve had the longest. I carry a $0 balance on all of them by paying them off monthly, but I’m still hit with the fees. Three of them are $59, one $39 & one $29 for a total of $245 a year… wow!
All of my other cards (8) which I’ve attained within the last 2-3 years all have no annual fees and I pay them off monthly as well. My assumption is that my credit is pretty good based on my ability to attain no annual fee credit cards. I bought a new car last year and based on my credit report, I was told I qualified for the 0 percent, four-year car loan. So again, my assumption is that my credit is pretty good. I have not checked my credit report in about three years.
My question: What affect would there be on my credit if I was to close all (5) of these credit card accounts? Would this hurt my score that much? I’ve gotten smarter and more responsible with my credit and appreciate the hard work it takes to maintain it.
Tell me how to handle this please. The fees are driving me crazy.
Taylor wants a great credit score while paying no annual fees. He is paying his balances in full and on time, but he is missing a few key steps. While all of his evidence shows he has excellent credit, he should really check his credit report to confirm. He is also carrying 13 credit cards. By itself, there is nothing inherently wrong with that, as he pays his bills on time and does not incur debt. The problem is that he is not getting any bang for the bucks he is spending on annual fees. And when he tries to switch products to ones without annual fees, Capital One won’t let him.
I have experienced this quirk with Capital One before. I tried to change my account from a single account to a joint account after I got married. Oddly, I was told that I couldn’t; I had to close the account and apply for a new one as a joint applicant. So my advice is to simply call Capital One each time you get an annual fee in the mail. At that time, you can tell them that you have chosen to close the account rather than to pay an annual fee.
One of three things will happen. First, they could just close the account before you have to pay the fee. Second, they might offer to waive the fee. Finally, they might actually suggest that they switch you to a product with no annual fee. I know that makes no sense, since they have already denied your request to do just that, but it has happened to me before. On the other hand, you might already have each of their cards that have no annual fee.
Either way, you shouldn’t feel trapped into paying annual fees that are not providing value to you. The amount of time that your credit accounts remain open is a factor in your score, but not a major one. Paying your bills on time and staying out of debt is far more important. And by keeping at least some of your longer-held accounts open, there should be little or no effect on your score from closing the others.
Keeping a good credit score is important, but only as a way to save money. By wasting money on annual fees for credit cards you don’t need, you are spending more money for no reason.
Good luck, Taylor!
(Note: While we attempt to be completely objective when reporting on credit cards, this site may be compensated by issuers when a reader applies for a credit card through the links within credit card stories or on our credit card search page.)