Before…

DFA community wisdom says forgo the “rewards” of the credit card industry and put an end to toxic relationships with giant credit card banks.

Last week I asked all of you to help me decide a Wise Use of Paid off Credit Cards.

The overwhelming majority say “forget FICO” and chose instead to “close ‘em, shred ‘em, and forget ‘em!”

So…

I decided to take your advice…

After…

Yesterday we closed all our old big bank credit cards, and were not the least bit sad to see them go!  Here is a list of our ex-saboteurs:

• Capital One
• Chase (twice)
• Citi
• HSBC

I also closed these department store cards:

• ABC Warehouse
• Banana Republic

Thank you to all who participated in the poll, and especially to everyone who added to the many insightful comments (53 at the time of this writing.) You input was very carefully combed over and very much appreciated.

So why else did we close our credit card accounts?

Good question.  For whatever reason it was not a decision that came quickly or easily, rather we toiled over the decision for months.

And I’m not really sure why we toiled.  Credit card companies have never been a benefit to me, or my wife.  They have never “saved” us from economic hardship – quite the opposite actually.

In the interest of full disclosure, there was a period a few years ago where my wife was out of work and we used the cards while “in the red” at the end of each month.  However, looking back if we would have simply lowered our standard of living – like we have now – we never would have needed to use them and would have gotten by just fine – nay… better – without them.

The truth of the matter is, credit card banks make me nervous.

Their business practices blow past “questionable” and fall more accurately in the realm of “criminal.”

You don’t have to hold a doctorate in Economics to realize that fattening up the bottom line by any means defines gospel truth to credit card banks.  Arguing the moral inventory of the credit industry would be a job reserved for the corporately brainwashed – to whom I say, “WAKE UP!”

Case in point… since paying our cards off – just a few months back – we have already been hit with a newly instituted annual fee whose induction was buried on page 3 of a statement we received about our interest rate going up.  Ultimately I take responsibility for not reading the entire document (*puke*) but this type of hoodwinking is exactly what I want to avoid – and exactly why I ended up canceling our cards.

**NEWSFLASH** Attention credit card companies – Despite what you may have learned in credit card school, your customers do not enjoy getting bamboozled.

Should you close your credit card accounts?

That is up to you my friend.  If you want my advice I would say to yes, you should close them – however I will refrain from using this blanket statement since some people love to play the rewards game.  Personally… I don’t have the time or patience for it, and would MUCH prefer simply never having to deal with the toxic credit card banks ever again.

Here are some reasons for and against closing your old credit cards accounts.  I will try to remain fair to both sides here…

Nah… I will call it exactly as I see it.

Reasons you may want to leave your account open:

• When credit cards say jump for rewards – you say how high.  Remember, to get their rewards you have to use the card in a very specific way.  And if you screw up once… BAM!  Fees high enough to wipe out months, maybe years, of built up rewards.
• Increased FICO score – In the above poll DFA readers overwhelming advised against basing your decisions on your FICO score or, as some called it in the comments, your “I Love Debt Score.”
• Security for emergencies – C’mon… you know what I’m going to say now right?  Don’t use credit cards for emergencies… work to build up your Emergency Fund and use that instead.  Trust me… this is the way to go!

Reasons for you to close your credit card account:

• No more temptation to use them – You can’t spend what you don’t have.  Getting rid of your cards eliminates temptation to spend money you don’t have.
• No more dealings with a company who lives to empty your pockets – From the time you’re of legal age the giant credit card banks are courting you with very carefully orchestrated strategies… all with the end goal of getting you into an endless cycle of interest payments to them.
• No worrying about fees (late payment fee, over the limit fee, etc.) – No open credit card accounts = no fees.  It’s just that simple.
• No more interest payments to others – Instead you can bank your money and pay yourself interest.  What a concept eh?
  
• No more supporting an industry that feeds on the less fortunate – I mentioned the fact that you no longer have to deal with deceitful companies, but closing your accounts will also end your relationship with an industry based on predation of the less fortunate.  According to the FDIC 93% of fees are charged to 14% of credit card users.

I’m sure there are countless other reasons to terminate your relationship with your big credit card banks… but this list is more than enough to open your eyes and give you a head-start.

Will I ever use credit card rewards again?

Because I am a Personal Finance Blogger…

I may soon be testing the rewards program of my local credit union in the hopes of providing DFA readers with a positive rewards solution – because I will never endorse big bank rewards programs and I would like to be able to endorse a healthy alternative… if possible.

In that spirit I have decided to leave myself a single credit option, albeit a much healthier one.  If you must keep a credit card, the following route is probably your best bet.

After recently switching to Capital One 360 for our banking – *love it* – we decided to subsidize the liaison with a membership to our local credit union.  A few weeks prior to our close ’em, shred ’em, and forget ’em decision… the credit union extended a joint, rewards credit card offer, and we accepted.  While we have no immediate intention of using this card, because it is with our local credit union (not a big bank) and because of the reason stated above, we are keeping the account open… for now.