There’s nothing more dramatic in one’s attempts to save money than cutting up your credit cards. As dramatic as this might seem. It might be short-sighted, impulsive, and ultimately counterproductive if you do it wrong. Like with most things in life, there is a wrong way and a right way to cutting up your credit cards. Don’t act rashly. Don’t act out of impulse.
It is understandable that you are stressed out about the high interest rates charged by most cards, and the fact that you are racking up more debt than raking in income. However, you have to play your cards right. If you make the wrong credit card cutting decisions, you might actually end up in worse shape financially than when you started.
Select your cards based on interest rate
The worst thing you can do when the impulse hits you to cut up your cards is for you to rip up your low-interest cards instead of your high-interest cards. If you want to save money on your credit card bills, hit your high-interest cards first. These inflict the most damage. Work on paying them off first. Once you have paid off these high-interest cards, rip them up. Focus your attention to lower interest cards next. Pay them off and rip them up. At the end of the process, only your lowest-interest card should be left.
Factor in freebies and fees
While selecting your cards for ripping based on interest rates is the smartest way to move forward, you should also balance this with the amount of freebies or premiums your cards give you. Many credit cards offer incentives and premiums. If the dollar values of these premiums are quite substantial and actually outweigh their interest costs, it might be a good idea to hang on to these cards. Thankfully, these cards are quite rare so you should rip cards based on interest rate.
Always keep a card
While it is easy to rip cards, it is hard to look into the future and think of situations where you need to whip out a card in an emergency. The truth is, we don’t know what emergencies the future might bring. That’s why it is important to have at least one credit card handy to handle unexpected expenses. It is good to be debt-free, and ripping up all your cards can help you get there sooner, but we don’t know what the future might bring and having one card around can help us out of tight spots. Make sure the card you keep has a very high credit limit but a low interest rate.