Do you have old credit cards lying around? If you ever asked yourself: should I close old credit cards? We have the answer fot you!
Sometimes keeping old credit cards can take up space, however it can be the best solution. So, when it comes to old credit cards, the question of “should I close them?” becomes a bit more complex than what it seems. But don’t worry, we are here to help!
Find out whether you should get rid of those old cards or not and how this decision could affect you. Also, if you want to check out more financial tips on our website, you can click on this link!
Should I Close Old Credit Cards?
Not all unused credit cards deserve the chopped up, some issuers allow different solutions. For example, you can downgrade to a no-fee version if an annual fee is your main concern. Here are some scenarios where closing it might be for the best:
- Annual Fees: if your card now carries a hefty annual fee you no longer justify and the issuer can’t offer a solution to it, cancellation can save you money. Just make sure any rewards points or benefits you’ve accumulated aren’t forfeited;
- Temptation & Overspending: for some, an unused card with a high limit can be a recipe for overspending. If you find yourself constantly tempted, closing the account can be a wise way to curb impulsive purchases;
- Security Concerns: if you’re worried about an old, rarely used card being compromised, closing it provides peace of mind. This is especially true if the card lacks robust security features;
- Multiple Cards with Similar Rewards: do you have several cards offering similar rewards programs? Consider closing the one with the lower credit limit or less attractive benefits. Just remember, prioritize closing newer cards over older ones.
However, think twice before closing an old card, because it can impact your credit score, as you’re going to learn bellow.
Does Closing Old Credit Cards Affect My Credit Score?
Yes, closing an old card can impact your credit score in a few ways, such as:
- Credit History Length: closing an old card, especially your oldest one, shortens your average credit history and can negatively impact your score;
- High Credit Utilization After Closing: this ratio compares your credit card balances to your total credit limits. Closing a card reduces your overall credit limit, which can increase your utilization ratio if your spending habits remain the same. A higher ratio suggests you’re nearing your credit limits, which can lower your score.
The good news is that the impact of closing a card on your credit score can be temporary, and your score can usually recover within a few months, especially if you manage your remaining credit responsibly.
How to Close Old Credit Cards
- Contact Your Issuer: call the customer service number on the back of your card and confirm your intention to close the account;
- Pay Off Any Remaining Balance: ensure your account balance is zero before closure to avoid future collection issues;
- Ask About Early Closure Fees: some issuers might charge a fee for closing an account within a specific timeframe (usually the first year);
- Request Written Confirmation: once the closure is confirmed, ask for written documentation for your records;
- Consider Keeping the Card Open with Minimal Activity: if you’re unsure about closing, consider keeping the card open by making a small, recurring purchase and paying it off in full each month. This keeps the account active and avoids negative impacts on your credit history.
Remember: don’t just cut up the card after contacting your issuer. Wait for confirmation before destroying it to avoid any potential complications.