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Does closing accounts help reduce credit card debt?

Many Texas consumers are saddled with incredibly high levels of debt. In an effort to reduce credit card debt, some make an effort to close as many open accounts as possible. In many cases, however, this is not the best course of action. In fact, closing accounts randomly can actually worsen an already dire debt scenario.

One problem that can result from closing open lines of credit is a drastic increase in one's debt utilization ratio (DUR.) This is the calculation of one's total level of outstanding debt, as compared to the total volume of available debt. Paying down credit card debt will reduce that number, which is a good thing. Closing accounts will drastically increase it, in most cases.

That said, for consumers who simply cannot stop adding to their already overwhelming debt level, closing an account can be a wise decision. When doing so, be sure that the balance on the account has been paid off in its entirety before contacting the card issuer. Keep a record of with whom you spoke, and if there are any reward points associated with that account, try to make use of them while the opportunity exists.

The desire to pay down high levels of credit card debt is understandable, and an admirable goal. For many Texas consumers, however, debt levels have simply surpassed their ability to pay. In such cases, more aggressive forms of debt relief are necessary. Filing for personal bankruptcy can be a more direct and lasting path to a debt-free future.

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

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