Credit cards are a useful financial tool. You can use them to pay for everyday purchases, easily shop in-store or online, and earn rewards when you swipe your cards. But it’s essential to use credit cards carefully. Otherwise, your actions can negatively impact your wallet.
Are you feeling uneasy about your recent credit card usage habits? You’re not alone. But it’s never too late to make changes. Here are some signs it may be time to cancel your credit card.
1. You want to improve your spending habits
Having access to a credit card can be risky if you struggle with controlling your spending. You may charge more than you can afford or be tempted to make purchases you don’t need. Credit cards are convenient, but you should use caution to avoid overspending.
It’s best to only use your credit cards for purchases you can afford to pay off as soon as your credit card bill arrives. Even if you can afford your recent purchases, you may spend more than you feel comfortable, hindering your progress toward other financial goals.
Canceling your credit card may help you curb unnecessary spending and alter your spending behaviors, giving you more control over your finances. Once you develop new spending habits, you can decide whether it’s time to use credit cards again.
2. You can no longer afford to pay an annual fee
If you have a credit card with an annual fee and the yearly cost is no longer within budget, it’s a good idea to wave goodbye to that card. One option is to cancel your credit card altogether. However, another option to consider is asking your credit card issuer to downgrade the existing card to a no annual fee credit card instead.
By doing this, the account history remains on your credit report. If you’ve had the card for a while and have paid your bills on time, this can help you maintain good credit. Plus, you can avoid paying an annual fee — which can be a win for your wallet.
Whether you downgrade your account or cancel the credit card, no longer paying an annual fee can free up more money in your budget for other goals — like boosting your emergency fund.
3. You’re going further into debt
When you don’t pay your entire statement balance in full, your credit card company charges interest. If you’re in credit card debt, you should prioritize paying it off before continuing using your cards. Otherwise, your debt will continue to climb.
If your debt is growing and you’re feeling more financial stress, consider canceling your credit card. This can deter you from making new purchases while you tackle your debt. If you need help developing a strategy to get out of debt, one of the best debt payoff apps can help.
If you have a sizable amount of credit card debt, you may want to consider getting a balance transfer credit card. You can transfer your existing debt to this card and take advantage of 0% APR during the promotional period to avoid further interest charges.
Make sure you pay the entire balance off before the 0% APR promotional period ends — and don’t use the card to make new purchases. Otherwise, you may continue the cycle of accumulating debt. Check out our list of the best balance transfer credit cards to learn more.
Always keep your finances in mind
This is a good reminder to always consider your finances. Your everyday decisions, including spending choices, can significantly impact your wallet. Taking steps to change your spending habits and how you use credit cards can improve your life and your financial health.
