Dear Liz: I've accumulated too many credit cards, sometimes to get extra frequent flier miles. All frequent flyer miles cards have an annual fee. I always pay the cards in full every month.
My credit score is over 800 every month. You've heard that your credit score is affected when credit accounts are closed. Is this true and how much? How do you recommend reducing the number of credit cards?
Answer: Yes, foreclosure cards can hurt your credit score. The “how much” question is impossible to predict and will depend on your credit situation as well as how you reduce your card wallet.
Keep in mind that there is no such thing as “too many credit cards” when it comes to credit scoring formulas. As long as you pay your bills on time and use only a small portion of your available credit limits, you can get a lot of cards and great results.
However, monitoring a bunch of different cards can be overwhelming. You also don't want to keep paying annual fees for cards that don't offer enough benefits.
If fees are your primary concern, identify the cards you want to close and ask the issuers if you can get a “product change” to a no-fee card. This usually will not affect your score because the account is simply transferred rather than closed and reopened.
If you need to thin out the herd, know that credit scoring formulas are sensitive to credit utilization, or the amount of available credit you use on each card and overall.
If you have multiple cards from the same issuer, ask if it's possible to add the credit limit from the card you're closing to one of your remaining cards. Another option is to close only cards with minimums.
You won't want to close any cards if you're looking for a large loan, such as auto financing or a mortgage, in the next few months. Defer until after you get the loan.
Also try to use or transfer any points or miles you have earned on cards you plan to close because these rewards may disappear upon closing.
Determine the value of the house
Dear Liz: I understand that as a widow, if I sell my home, I get the increased value from the year my husband died. Should I have gotten an appraisal back then (26 years ago)? How do I know what my home is worth at that time? We bought him in 1973 and he died in 1998.
Answer: In most states, half of the property owned jointly by a married couple receives a new, favorable increase in tax basis upon the death of the spouse. In community property states like California, both halves of the property may get this move.
A professional appraisal 26 years ago would have been helpful, although a good appraiser can do a retrospective appraisal, said Jennifer Soday, a Long Beach estate planning attorney.
Before you hire an appraiser, hire a tax professional, Soday said. Your CPA or tax preparer will use the data to file your return, report the sale of your home and calculate any capital gains taxes due, so find out how they recommend getting it.
Alternatives to paper checks
Dear Liz: Because I'm concerned about check fraud, I pay most of my bills online. However, you still need checks to pay the housekeeper, gardener, etc. I use a gel ink pen to deter fraud but I'm wondering if there is something else I should consider doing.
Answer: Checks you hand out to people you know are probably less risky than ones you send through the mail, but there may be better options.
Most Americans have accounts that include at least one peer-to-peer payment app, such as Venmo, Zelle, or PayPal. This can be a safe and convenient way to pay people you know.
Make sure to create a strong, unique password for your account and to keep apps updated. Whatever payment method you use — checks, online payments, or peer-to-peer apps — keep monitoring your linked bank or credit card accounts so you can quickly spot and report any suspicious transactions.
Liz Weston, certified financial planner, is a personal finance columnist for the Los Angeles Times and NerdWallet. Questions can be sent to her at 3940 Laurel Canyon, No. Box 238, Studio City, CA 91604, or by using the “Contact” form at Asklizweston.com.
