I have an American Express card that ties in with my frequent flier miles. They charge me $85 a year to keep the card. It seems unless you charge a lot of money per month the miles don't add up. So my question to you is: I would like to cancel the card and I'm wondering if it would have any ill effects on my credit score? If so I'll just continue to pay the $85. Thanks so much. -Scott
Scott – Sometimes the cost of carrying a card way outweigh any benefits. If this card in particular has a high credit limit and is a big part of your credit-card portfolio, it may make sense to keep the card to protect your credit score. If you cancel the card you run the risk of losing a chunk of points on your credit score.
However, $85 is also a big chunk of money. Here’s how you know when it’s worth paying the fee, or worth canceling:
Will you need your credit score in the next year or so? If you’re looking at buying a home or a car or taking out any other large loan, you want to keep a good credit score intact. Paying that $85 and keeping the card will be worthwhile because a great score means a great interest rate, which saves you many times over.
But if you don’t have any plans to buy a home or refinance your home or take out a big loan, whatever points you lose by canceling the card, you have time to make up within the next year or so. Now, if only everyone would do away with those pesky annual fees!
>>Question for our experts? Email them here
Carmen Wong Ulrich is the host of On The Money