When to Cut Up a Credit Card & How to Dispose of One
There are two main reasons to cut up a credit card. For starters, you may need to switch to new plastic if your card is damaged, about to expire or it is being updated by the issuer. The other primary rationale for casting away your credit card is to remove temptation. This is an admirable and financially sound step to take, but some people may be better served by cancelling their accounts rather than simply taking a pair of scissors to their plastic.
In any instance, it is important to follow the proper protocols so you do not end up in hot water with your credit card company, harming the environment or opening a door to fraudsters.
Pros & Cons of Cutting vs. Cancelling a Credit Card
The first decision you need to make when it comes to cutting up and disposing of credit cards is whether or not you wish to actually close your account, as opposed to cutting up your card to remove spending temptation.
There are inherent distinctions between these two actions, as you’ll see in the tables below, but it essentially boils down to the fact that when you cut up your card, nothing really changes on the issuer’s end – except for seeing a sudden stoppage in your charges.
The following tables depict the various ramifications of cutting up and cancelling credit cards as well as the pros and cons of each.
|Cutting Up a Credit Card||Cancelling a Card (i.e. account closures)|
Stops Overspending: Without your plastic, you’ll likely find it much tougher to spend beyond your means. ATM withdrawals and cash purchases are harder to swallow.
Credit Score Benefits: Assuming you’re cutting up your card due to missed payments or other credit card misuse that would show up on your credit report, removing the possibility of future occurrences will enable positive information to eventually devalue your past.Your credit card will continue reporting to the major credit bureaus on a monthly basis. Only now it will reflect responsible use, as choosing not to use plastic is regarded as such. After all, you will be minimizing your credit utilization ratio.
Easy to Reverse: You can call your credit card issuer and request new plastic whenever you feel you’re ready.
Stops Overspending: Not having an active credit card will prevent future spending problems, but it will also rob you of the ability to easily infuse your credit reports with positive info on a monthly basis.
Save on Fees & Interest: If your credit card charges an annual fee or you routinely carry a balance, you will save money as a result of cancelling your card.
May Forget Account Number: Making emergency purchases even more difficult, and making it harder to request account records.
Forgotten Fees: With your card in pieces, you may forget about any annual fees it may incur, resulting in a balance, missed payments and interest.
No Rewards: Cash purchases, unfortunately, produce no rewards earnings. Put this in perspective, though. Continuing in your overspending ways will cost you a lot more than you would ever recoup in the form of rewards. Nevertheless, you’ll be effectively subsidizing the purchases of credit card users by paying exclusively with cash.
No Credit Score Benefit: Credit cards report information to the major credit bureau every month, even when they’re in pieces. This will make it harder to improve your credit score and will effectively emphasize any negative information in your credit reports.
Hurts Credit Utilization Ratio: By closing your credit card account, you will be reducing the amount of available credit you have at your disposal, thereby increasing your overall credit utilization ratio.
Less Spending Power: While less spending power does mitigate debt potential, it also means you may lack the financial firepower to deal with monetary emergencies.
No Rewards: Same as Cutting Up a Credit Card
|Learn More||How to Cut Up & Dispose of a Credit Card||Guide to Cancelling Credit Cards|
At the end of the day, it’s clear that the best strategy is to cut up your credit card while keeping your account open. This enables you to remove spending temptation while also retaining monthly credit-building benefits. The only time this is not advisable is if your card charges an annual fee. In that case, we recommend closing the card charging the fee and then opening a credit card with no annual fee that you immediately proceed to cut up.
It’s also important to understand that cutting up or cancelling your credit card should be but one component of a larger plan to improve your financial performance. In order to see real results, you’ll also need to make a list of your monthly expenses, ranked in terms of importance, and then eliminate all discretionary spending until you are saving enough on a monthly basis to build an emergency fund, pay off your debts in a reasonable period of time and, ultimately, maximize retirement contributions. What results will be your budget.
How to Cut Up & Dispose of a Credit Card
Based on the above comparison, most people should cut up their credit cards when they have proven incapable of self-controlling their spending and avoiding habitual debt, as doing will prevent future charges while also giving you the option of easily reversing your decision. This, of course, assumes that your card does not charge an annual fee.
With that being said, here are the basic steps you should take when cutting up and disposing of an unwanted credit card.
Step 1: Call Your Issuer – If you’re not replacing your card with new plastic, confirm that you can access your account with just your social security number and not your account number. This will enable you to properly manage your account and avoid complicating your financial situation unnecessarily – not being able to make a payment, for example.
Step 2-A (Non-Metal Cards): Cut Up Your Card – Cutting up a piece of plastic is pretty straightforward. You just need to make sure you’re working with the right tools.
- Scissors: Choose a heavy-duty pair, not something out of your elementary-age child’s pencil box.
- Shredder: This will likely only work with industrial shredders and shouldn’t be your first choice.
Step 2-B (Metal Cards): With metal credit cards, such as the Sapphire Preferred from Chase, the issuer may mail you a special slip into which you are supposed to insert your card and return it for safe disposal. This typically occurs when you are closing your account or requesting a replacement card, or if the issuer initiates the return. This service will likely be unavailable if you simply wish to remove temptation. In such instances you may want to try the following:
- Freezing Your Card: You can always put your card in a Tupperware container filled with water and then freeze it. In case of a future financial emergency, you may want to have an icepick on hand!
- Burying It: Follow your dog’s lead (or the Sopranos) and just bury your credit card. As long as you do it in your own yard, the card is unlikely to be found by a third party. Just make sure to dig a deep enough hole to discourage you from going after the card for frivolous purchases.
- Locking It Away: Putting your credit card in a safe (that perhaps your spouse only has the combination to) or a bank safe deposit box can effectively remove temptation and allows for the support of a peer as you combat overspending.
Step 3 (Non-Metal Cards): Dispose of It With Other Trash – This is probably the only time we’ll recommend this, but you actually shouldn’t recycle your cut up credit card. We typically have fewer items in our recycling bins than our trash cans, making it easier for opportunistic fraudsters to cobble together the pieces. Besides, experts say the impact on the environment from thrown out credit cards is negligible compared to things like plastic bags.
Step 4: Clear Your Browser History – It’s important to remember that we are now in the digital age. That means if you really want to hamstring your spending capabilities, you’ll need to clear all saved credit card information from your favorite websites as well as clear your browsing history – just to be safe.
Image: Derek Hatfield/ Shutterstock
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