You’re cutting up your credit cards? Seriously? How will you live without them?
Credit cards have been an integral part of our lives for a long time. They make shopping easier. We never run out of money and they provide a sense of security when we’re buying online or traveling overseas.
Given how useful we find them, abandoning old credit cards and reducing your credit usage might seem like a drastic measure to many people. Yet cutting up credit cards is actually quite popular and for some good reasons.
Why is cutting up credit cards so popular?
This may seem like a strange idea to the many card lovers out there, but for some people cutting up their credit card is the first step in developing the self discipline to build a healthier financial life.
You might be cutting up your credit card because you’re trying to get out of debt and want to stop being a slave to those debts. And I get why you would.
The average credit card debt is now over $5,000. Don’t think that sounds too bad? If you can only afford the minimum repayments, it could take 20 years to pay that off!
There are many reasons why people choose this course of action. So let’s get started with why some people cut their cards up and see if it’s the right choice for you!
Why do people cut up their credit cards? What are the benefits of cutting them up?
People cutting up their cards is considered by some as a symbolic act of cutting the financial ties with their credit card companies. Even though you still have an outstanding credit card balance to make payments on.
It’s proof that you are serious about getting rid of credit card debt and getting away from spending money you don’t have. Because if it wasn’t for those pesky plastic cards you’d never spend more than you earn!
There are a few money truths we all need to memorize, and the need to spend less than you earn is right up there with many others.
Canceling those lines of credit is cutting out the middleman, so to speak, and avoiding any potential future temptation. You’re cutting your abilty to go further into debt by cutting up your credit card. And that is a huge benefit!
Don’t get me wrong, cutting your card isn’t going to solve all your financial problems in one hit, but it’s an important factor in making a good start.
If nothing else, having no credit card account to fall back on means you cannot be tempted to overspend on something you don’t need or can’t afford.
At the same time it stops you from making impulse purchases. Which again is a huge benefit for those of us who find it hard to say no to a bargain.
Another benefit is when you have no card, you are not tempted by the ability to earn rewards. Earning rewards is great. The problem is you have to spend a lot in order to earn a miniscule amount in rewards. Not so great.
And one final benefit of cutting up your credit cards to consider: you’ll never get that horrible feeling in your gut as you open your credit card statement. Worrying about exactly how much you’ve spent the previous month.
What are the alternatives to cutting up credit cards?
If you don’t want to cut up your credit card completely, there are other things you can do instead.
One option is to keep your cards but stop using them as much. If you have strong willpower this could work. But let’s face it, if you had strong willpower you wouldn’t have credit card debt now would you?
Another way is to put them in a sealed envelope and store this somewhere safe.
Alternatively you could freeze your old card in a tub of water. That should make it difficult for you to use them as a payment method!
If all else fails, leave your wallet at home when you go shopping so there’s no chance you can take out the plastic and spend.
Use cash when you want to purchase something, the cash envelope system is a mainstay for many personal finance geeks like myself. The point of using only cash is that you can see what money you have and it feels hard to pay it over to the cashier than swiping your card!
There are other alternatives but cutting up your credit cards might be just what you need if you want to get your personal finances under control. It sure beats giving up completely on your debt repayment plans!
Why you might want to keep a credit card
There are also any reasons why you might want to keep a credit card.
It coud be worth keeping a credit card for emergencies only. This credit card would have low spending limit and you’d only use as a form of emergency fund.
Using a card as an emergency fund can be especially helpful if you haven’t yet built up enough money in a separate bank account ring fenced for emergencies. It’s a temporary phase though as your emergency fund needs to be real money in the bank. Do not rely on the plastic forever.
If you shop online regularly then using a credit card gives you more protection than debit cards do.
If you have an irregular income then the flexibility of using your credit card until your next income check is the most important factor for many people. As long as you pay off the balance in full straight away.
If you have a lot of business expenses that you pay for and claim back, then a credit card is probably pretty essential to ensure you have enough money in your checking account. You do not want to be waiting on an employer paying your expenses in order to buy groceries!
Your plastic could come in very handy when traveling abroad too as they tend to be accepted everywhere. Unlike American Express or Diners Club which many places do not take, especially in Europe.
It also makes paying things like car hire much easier as they usually require a credit card charging deposit. Cash is not an option for most car hire places these days.
When paying off credit card debt is it important to cut up your credit card?
It can be but it depends what you’re using the card for and how much debt you have.
If all of your purchases are paid off each month and you’re carrying no oustanding debt, then there’s no reason to cut them up. You are obviously in control of your financial situation and spending.
But if you use them too often, only make the minimum payment or have an outstanding balance that you are struggling to pay off. Then getting rid of your plastic could be the best financial decision you make this year.
The good news is that regardless of whether or not you keep your cards, making it your goal to become debt free is a good decision.
does cutting up your cards hurt your credit score?
No! The credit card companies won’t even know you’ve done it unless you happen to phone them up and tell them. And what’s the point in doing that?
Taking on more debt can hurt your credit score, paying off debt doesn’t, until it does.
What I mean is, having no debt at all (no mortgage, student loans, finance deals or using your credit cards at all), can eventually impact on your credit score.
Potentially to the point where it feels like you have a bad credit score! Because using credit and being in debt bizarrely makes your credit score better!
BUT! You only need a great credit score if you want to take out a bank loan, a new card or other forms of personal loans!
If your reason to cut up cards is to stop yourself from using them and getting into more debt, ignore your credit score completely. Not worth it right now.
Cancelling your cards
Cutting up a credit card is often the most effective way of getting rid of them. But you might prefer to completely cancel it instead.
If you do decide that cutting up your cards is not enough for you then cancelling them can be an alternative solution.
Canceling a credit card will depend on how much money you have left to pay off and whether or not there are any ongoing finance deals associated with the account.
As well as other factors such as late payments being made in recent months so late fees are due to be added.
Is it better to cut up a credit card or cancel it?
Cutting up your credit cards is not the same as closing your account with the credit card company.
Cutting up your cards keeps your account open, which you need in order to repay the money balance you have built up on it. Whether you pay just the minimum payment (not recommended,) or extra money to reduce the balance more quickly.
Closing each your actual accounts would mean the full balance would be immediately payable. Closing your accounts is good if you have nil balances and quite simply do not want to use them ever again.
If there is an annual fee and you no longer want to use the card, then you definitely want to close down your account. Otherwise that annual fee will be added to your balance without you realizing it.
Got a nil credit card balance?
Cancelling a credit card could be the best option for you if you:
- Never use it and don’t want to in future.
- Don’t have enough willpower just to leave the card unused, if it’s in your wallet, you’ll use it.
- Have too many unused credit cards lying around doing nothing.
- Don’t want to pay an annual fee for something that you are no longer using.
One reason not to cancel your credit card is because there are benefits like free air miles, cash back or discounts with certain retailers, You’ll lose these if you close your account or switch to using your debit card.
And these free benefits can make it worthwhile paying off all of your debts but still keep hold of one particular plastic!
Check your credit report
When you go ahead and close your credit card account, you’ll want to keep an eye on your credit report to check how your credit score has been affected.
It’s always useful to periodically check your score as mistakes can be made. If anything is wrong, you can take action to get it corrected before you need your score to be in tip top condition. E.g. applying for a loan or mortgage.
How do I destroy a plastic credit card?
There are a few things you need to do when cutting up your cards.
First off, use strong scissors to cut them up into little pieces. Cutting credit cards in half is not enough, you need to really cut through everything on them.
Next, make sure you destroy the security chip. This means cutting across it a number of times (2-3 should do).
Finally, ensure that you cut out the small security numbers on the card.
In total I recommend you cut that small plastic card into 9 or 10 pieces. Yes really!
Then place the pieces at the bottom of a messy bag of household waste, the yuckier the better. That way you won’t be tempted to do what I did.
Cutting it up in such a way that I could piece it back together and use it for online shopping. Temptation and all that!
What else you need to do along with cutting up your credit card
Destroying your card is one of half of a job. You also need to delete it from all those online places you have it saved.
Autofill on shopping sites is responsible for a lot of excess spending. With your card destroyed, you want to ensure it cannot be used digitally as well.
The easiest way to do this online is to clear your cookies and choose the advanced option. Choose autofill data and this should wipe your card details from every website it is stored on.
Cut or close, the choice is yours
Cutting up your credit cards might seem like a drastic measure, so you should take some time to think about the pros and cons of this decision.
The right decision will depend on your ability to save money and repay your balances. There are many people who have been able to say goodbye to the credit card hurt. To destroy their plastic and live a debt free life. They love the benefits that being debt free brings.
If you’re not using your cards as often as before, it might be best to cancel or cut up those old plastic pieces of yours. But if they are still coming in handy from time-to-time, there is no need for alarm.
Just make sure that when you do pay for a purchase or two with them, don’t let yourself fall back into bad habits by spending more than what you can afford.
I don’t want you to make a rash decision. If your credit cards aren’t making it easy for you, I think that cutting up those plastic pieces of the past might be the best option.
There is no sense in keeping a card that encourages you to have continually revolving debt. Especially if you’re already struggling with making the minimum payments to reduce your balance.
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Last Updated on 13th September 2021 by Emma