Bear in mind that a zero balance does not report on FICO (the credit scoring model). So, for example, a one dollar balance with a 100 dollar limit increases your score more than a 0 dollar balance on the same account. Further, if you don't have any balances on any revolving accounts, that impacts your score negatively.
I agree with you that 74% is ridiculous. And you are exactly correct in thinking they don't want you to keep it. I can't speak for Amazon on this one, but what is going on is credit card companies are decreasing their exposure - canceling inactive accounts/lowering limits and raising their fees.
This is their business and what they think they need to do at this time. The point I'm making is that these actions results in a much lower credit score for a great many folks - unless they know what to do.
Credit scores impact our lives in a lot of ways other than borrowing - and we never know when we might want to borrow or when borrowing will be the wisest financial option.
I truly understand your points here, and I agree with the sentiment. What's at stake with your score in the near term is losing long positive history. If some of your cards you close are seven, ten, twenty years old.. you can't get that back helping your credit score for a very long time.
Here's a really brief ABC news radio story about Should I cut up my credit cards. It gives the basics anyway.
Thanks for your reply.
Thanks so much for your thoughtful reply. I think we will keep the long-standing CitiAA card open, but just pay it down to a couple of hundred. We’ve had that one forever. We only had the Amazon card for a few years. We also have a Discover card we’re paying off, and I think two is enough. (Besides we have Lowes, Home Depot, Penneys, etc.)
I know all too well how the credit rating affects us in other areas. I just wonder how much longer it will be a viable assessment of people’s ‘character’. Remember after the oil and gas and saving and loan crashes, nearly everyone had declared bankruptcy or had credit problems. Most lenders were understanding and forgiving of those problems in light of the economic melt down. And today, with jobs tough to come by, and with the current economic situation, if employers continue to use credit ratings/bankruptcy etc as factors for hiring/not hiring, it’ll be the same thing as it was then—almost everyone was in the same boat in some hard-hit regions, and if they wanted to stay in business, they had to break down and hire some of those people.
I know times are much different now, but frankly, this whole country needed to get off of credit, and this will probably be a good thing for people in the long run. Seriously, when you are forced to find other ways to come up with the money you need in emergencies, or (heaven forbid) have to SAVE UP for something you want to buy, you’re much better off. I think this is all good.
Thanks again for the advice.