When should I close my credit card accounts?

  • Time to go: you can pay off your credit card balances before or after closing the closing the accounts, the important thing is to get rid of them, says Dave Ramsey (Photograph by Martin Meissner/AP)

    Time to go: you can pay off your credit card balances before or after closing the closing the accounts, the important thing is to get rid of them, says Dave Ramsey (Photograph by Martin Meissner/AP)


Dear Dave,

I’ve started following your plan, and I’ve got a beginner emergency fund of $1,000 saved. Now that I’m ready to start paying off debt in Baby Step 2, do you recommend paying off credit card balances before or after closing the accounts?

MAEVE

Dear Maeve,

I’m really proud of you. Congratulations on starting the journey towards getting out of debt and gaining control of your money.

Honestly, either way is fine. The point is to get rid of them, and stop using the stupid things. I like the idea, and the finality, of going ahead and closing the accounts and cutting up the cards. Personal finance is 80 per cent behaviour. Getting credit cards — and credit card debt — out of your life is a great first step in really learning to behave with your money.

Remember, you don’t build wealth or save money by using credit cards. And you’re naive if you think you’re going to play around with a multibillion-dollar industry and beat them at their own game. The only way to win against credit card companies is by refusing to play around with them.

—DAVE

Dear Dave,

I’d like to start paying a little extra each month on my car loan, so I can get out of debt faster. Would it be a good idea to write a separate cheque for this extra amount?

STEVE

Dear Steve,

I think that’s a great idea. You can include the extra cheque in a separate envelope with the regular payment. In addition, write “principal only” in big, bold letters on the extra envelope and on the extra cheque. Make sure to also include the account number in the notation line at the bottom. Follow these guidelines, and you’ll be much less likely to run into problems as result of someone at the bank not paying attention.

Some companies use payment booklets that have a box specifically for entering any amount you want applied directly to the principal. See if this is available to you, as well. Regardless, make sure you keep an accurate, written record of the monthly and overall amounts you’re designating as “principal only.”

Great question, Steve!

—DAVE

Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 15 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

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Published Apr 27, 2019 at 8:00 am (Updated Apr 27, 2019 at 12:13 am)

When should I close my credit card accounts?

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