Can closing accounts help with credit card debt?

Once a Georgia consumer has become overwhelmed with debt, many feel pressured to take action to remedy the situation. Some will attempt to implement a debt relief plan, in the hopes that strict adherence to a program will lead to the reduction of credit card debt and other outstanding financial obligations. Often, closing certain credit card accounts is a part of that plan.

Reducing overall debt levels is always a good thing. However, the manner in which this goal is achieved can make a big difference to one’s end result. For example, closing multiple credit card accounts will often result in an immediate increase in their debt utilization ratio (DUR.) This is the calculation of one’s total credit use as compared to their total available debt.

If the goal is to preserve or increase one’s credit score, a better approach would be to pay down the balance on the card with the highest interest rates, which would also reduce a consumer’s DUR. However, in many cases the total volume of outstanding debt is so high that virtually any repayment efforts are futile. In such cases, a more aggressive debt relief approach is needed.

Many Georgia consumers would be better served to research the benefits offered by filing for personal bankruptcy. Doing so can lead to the discharge of many types of debt, including credit card debt. While one’s credit score will take an immediate hit, it is possible to begin rebuilding a positive credit history as soon as the bankruptcy process is complete.

Source: Tulsa World, Closing credit cards may not be your best move, Phil Mulkins, Nov. 27, 2013