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Handling credit card debt

Kentucky residents who hold credit cards may be looking to eliminate some of them. While that may seem relatively simple and benign, there are reasons why some cards are better to get rid of than others.

A major issue when closing a credit card account is how losing the borrowing amount the card provides will affect credit. Having two cards will increase the holder's total borrowing amount. For example, if a user has one card with a total capacity of $5,000 and $2,500 is charged, 50 percent of the capacity has been used. However, if two cards are available with a limit of $5,000 each and $2,500 is charged, the credit utilization becomes 25 percent.

Credit utilization is important because it signals what amount of credit one uses routinely. If the amount is high, it leaves less room for additional borrowing. Creditors look to this number to determine if a debtor is able to incur more debt, and lenders look for a ratio of 30 percent or lower. Choosing the credit card that is best to cancel may depend on the card's newness and the fee the company charges. A card acquired years ago may not be the best account to close. The longer the card was active, the more credit history is available. Conversely, if a card is not used or used infrequently, paying a fee just to have it may take unnecessary funds each month. It might be beneficial to ask the issuer to lower the fee before making the decision to cancel it.

When a credit card holder falls behind on payments, creditor harassment from collection agencies may often be the result. Those who are faced with overwhelming financial obligations and who are getting frequent calls from bill collectors may wish to speak with a bankruptcy attorney to determine the forms of debt relied that may be available.

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