Hello!

I'm a college student and I have a Wells Fargo checking account and Wells Fargo Credit Card. I'm seeking some advice. Right now I have a good credit score and my Mom says, "if you ever want to buy a house, you need a credit card and a good credit score".

Well, the reason I need advice is because I'd really like to cancel my Wells Fargo credit card. I owe close to $1000 on it and it seems like that number never, ever goes down. Once in a while, I'll be late and it's a $40 charge, on top of monthly finance charges and interest and no matter how much I pay off, it seems like the debt keeps growing slowly. I feel like this is the biggest rip off, and I'd like to cancel it but is this wise? I want to buy a house in the future so.... is canceling my card the way to go?

If I were you, I would keep the card. Put a sticky note on there "For emergencises only." You will get it down if you stop using it!

Right now the best strategy would be to stop using the card altogether and try to pay it down. Closing the card will probably lower your score. If you are able to set up an automatic monthly payment in the same amount every month (for more than the minimum payment of course) you can avoid the late fees. Eliminating the late fees will help a lot in bringing the balance down. Also, look to see if you are being charged some form of “payment protection” or “credit insurance”. They are recurring charges and can eat up most of the principal. Canceling any form of insurance on the card will make a big difference in bringing that balance down.

The main reason that you should avoid closing the card if you can keep yourself from using it (the old method of freezing it in a block of ice to force you to think before you use it might be helpful) is that two of the factors making up 40% of your credit score an be negatively affected by closing the account. Closing the account will eliminate available credit while the debt remains high, which can cause a score drop. Also, the age of your credit could be affected if you cancel the card. Bringing the account to a zero balance and then paying it in full every month afterward is the best way to keep the account active and maintaining a good score.

I managed to buy a house without ever having a credit card, I was also told by those older and wiser than me that I would need to have a credit card to have a credit rating, but I found that wasn't true. When I was a student I had two clothing accounts, both were interest free store cards, and I used them both on a regular basis but always kept the levels relatively low, low enough for me to afford them anyway. It helped that they were both interest free but there were the odd months that I couldn't afford the minimum repayments, you know what it's like when your a student, sometimes even a dollar seems out of reach! Anyway, I applied for a mortgage whilst doing a post-grad degree, I had 2 part time jobs, and the broker told me that I had a good credit rating. Those 2 store cards were the only credit I had ever used.

My situation is similar to yours. I have two credit cards with very high balances, and even though I swore not to use them, I still did anyways. I thought about canceling them, but didn't want to take the risk that the cancellation would negatively impact my credit score. Canceling credit cards is more of a way to stop yourself from using the cards, and honestly, is probably the only real benefit of canceling the card. Maybe you should focus on just trying not to use it at all. What helped me was just physically taking the card out of my wallet and leaving it at home, so that I wouldn't be tempted to use it. This method actually helped a lot, since it was the impulse buys and little purchases that kept adding on to my credit card balances, keeping them at the same high balance even though I consistently paid more than the minimum payment due.

Don't cancel your card that will lower your credit rating. Rather pay off the card, it it's only $1000 you should be able to make extra payments and get it taken care of within 6-8 months. Be careful with Wells Fargo, if you default on the card, they can and will clean out your checking account to pay the balance.

In fact I would pay down the card and move the account to a different bank, maybe you can get a card with a low APR and transfer to a different provider of credit cards (please no BoA or Capital One etc)

__________________

Otruantmuse,

I have been down the road you are going, and the end of the road can really suck. I was in college, and stopped going because my '$1000' credit card ended up with 10k on it. I ended up in the Navy (which turned out well) using a bonus to clear my debt. I still didn't learn my lesson, got back into debt again, this time taking 5 years to get out. If your using a credit card, your living beyond your means. Thats it. I am an avid follower of Dave Ramsey, you should check it out. If I had followed him sooner than 3 years ago, I guarantee that I would have 4 times the net worth I have now. Just my 2 cents.

all it takes is Discipline, play the system, have the cards but use them within your means

__________________

Exactly right! I would agree that your credit card should only be used for emergencies. This will give you time to catch back up with your payments and limit your usage.