Payoff and close accounts?

Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the editor and publisher of DebtSmartŪ.

Scott,
I heard you this morning on the radio and didn't get a chance to call in. I had a quick question. Once I pay off my credit cards, does it help my credit to leave that account open, or should I close this account? Thanks.
--Nathan

Nathan,
Many people ask me this question--it's a great one.

My opinion is that you should always leave accounts open after they're paid off unless there is a reason to close the account. Once a credit card is paid off you'll more than likely receive great offers from that bank. Their computers will look through their databases and come up with, "hey, we're not making money from this account, send him a 0% transfer offer!"

That doesn't mean that you should take advantage of every credit card offer you receive but being the recipient of these offers gives you financial flexibility, credit options, and that is power! Power to never be at the mercy of any one single bank.

There are circumstances that may require you to close an account after it's paid off. Those instances are very rare. The main reason would if you're trying to get a new mortgage or refinance. Many banks may ask you to close open lines of credit to reduce their risks when giving you a mortgage. Otherwise, it is not going to hurt to have a zero balance credit card.

The bottom line here is that open credit is good. Good when it's used wisely. Wisely, meaning to reduce the cost of other debt or for emergencies.

Hope that helps!

Regards,
Scott