Dear Liz: What you said about carrying credit card debt was spot-on. My wife and I have never paid a dime in interest on our credit cards, and our credit rating is high. None of our cards have annual fees either.
One thing you didn’t mention is that with many of the reward programs that many cards have, we’ve made out like bandits (“cash back,” free flights, etc.) simply by using our card to buy things that we would have bought for cash anyway if we didn’t have the cards.
One other point: It might be good to advise readers that if they have a card, they should use it occasionally. We had one bank cancel our card because we never used it (our others had better rewards programs!), and having a card canceled (for any reason) can look bad on one’s credit report, correct?
Answer: It can, which is why you should try to keep your accounts active if you’re trying to improve your scores or you’ll be in the market for a major loan, such as a mortgage or an auto loan, any time soon. You can keep a neglected account active with little effort by having a bill charged automatically to a card and then arranging an automatic payment from your checking account.
You shouldn’t, however, be fearful about closing an occasional account if your scores are already high and you won’t be applying for new credit soon. Closing an account or having one closed shouldn’t have a major effect on your scores, and any ding you suffer would be temporary.