Should You Cancel Your Credit Cards in 2024?

As of the third quarter of 2023, U.S. credit card borrowers owed a whopping $995 billion, according to TransUnion. Ideally, your balance accounts for just a minute percentage of that total.

But if you have been carrying a credit card balance for longer than you'd like to admit, you may be at the point where you're beyond frustrated by it. And if you're just about done paying it off, you may be inclined to avoid a repeat scenario by canceling your credit cards once the new year arrives.

It's easy to see why you'd think a move like that would be the answer to your financial woes. But before you rush to cancel your credit cards, you may want to try employing other strategies to keep your spending and balances more manageable.

The problem with canceling credit cards

It's easy to blame credit cards for the fact that many consumers get in over their heads balance-wise. But actually, when managed in a savvy way, credit cards offer a lot of financial benefits.

For one thing, many credit cards give you the opportunity to earn reward points or cash back on purchases. So that could actually make your shopping less expensive in an indirect manner.

Also, having a credit card in your wallet could come in handy if you happen to encounter a surprise expense on the fly. Let's say you're driving along when your car starts making strange noises, so you manage to pull into a nearby auto shop to see what's what. You might come out an hour later with an answer and a $250 bill. And in the absence of having the cash, you might need a credit card to cover that expense.

Plus, canceling credit card accounts could actually cause damage to your credit score. One factor that goes into calculating that number is the length of your credit history. If you close a credit card you've had open for many years, your score could drop, making it harder to get approved to rent an apartment or take out a personal loan. Closing a credit card can also affect other scoring factors, such as your credit utilization ratio and your credit mix.

Strategies for managing your spending

Before you decide that canceling your credit cards is the right move in 2024, first, try following a budget so you're spending more carefully across your various expense categories. And if you don't like the idea of poring over spreadsheets every week, find a budgeting app that's easy to use.

Even if you don't want to budget in any way, shape, or form, you might manage to steer clear of debt while continuing to use credit cards by simply pledging to check your balances every week. If you see, for example, that you've already spent more than expected by the mid-month point, you'll know to cut back for the remainder of the month so that your balance will hopefully be payable in full.

Of course, if these tactics don't work and you find that you can't stop charging impulse buys on your credit cards, then canceling them may be your best bet. But before you resort to that, give yourself a chance to see if you're able to rein in your spending.

Credit cards really do offer a lot of financial benefits. So if you're able to use them without landing in debt month after month, it's worth hanging onto them.