Key takeaways
- There’s no limit to how long you can keep your credit card open.
- Closing a credit card can decrease the average age of your credit history and increase your credit utilization ratio — both of which can hurt your credit score.
- Alternatives to closing a credit card include downgrading to a card with no annual fee or upgrading to a card that better fits your lifestyle.
- Use your card at least once every few months to keep it active and a strong part of your credit history.
Maybe you’re new to credit and not sure how long you should hold onto a credit card after opening a new one. You might also be wondering whether it’s time to give up a card that you’ve outgrown. There’s no one answer as to how long you should keep a card account. Rather, it depends on your overall credit and how much of an impact closing a card — and the potential drop in your score — could have on your financial goals.
It’s helpful to weigh the benefits and risks of closing your credit card and consider alternatives to canceling your account. Additionally, there are smart options to consider if you’re open to keeping the account open.
How long should you keep a credit card account?
There’s no limit to how long you can keep a credit card account open as long as you’re in good standing. The longer you keep it open, the more of a help it is to your credit score since it adds to the age of your credit history and contributes margin to your credit utilization ratio.
Depending on how extensive your credit history is and how long you’ve had the card, it could make sense to keep it around even if you’ve stopped using it regularly.
How closing a credit card affects your credit history
The longer your credit history, the better the impact on your credit score. Length of credit history plays a key role in how your credit score is calculated and accounts for 15 percent of your FICO score.
If you have a credit card that’s 20 years old, for example, but the rest of your accounts only have single-digit ages, that one old card has an important impact on pulling up your credit age. Closing it would decrease — perhaps substantially — the average age of your credit history.
How closing a credit card affects your credit utilization ratio
Closing your card also decreases your amount of available credit, which may increase your credit utilization rate. That accounts for another 30 percent of your FICO score.
Even if you’ve only had your credit card for a few months, your credit score still benefits from the credit limit attached to that card. That’s because your credit utilization ratio compares the amount of revolving credit you have access to with the amount of revolving debt you have. Therefore, closing a card with a high credit limit would make a significant cut to the amount of credit you can access, which might bring your debt balance higher than the recommended 30 percent of your available credit. The side effect: your credit score drops.
When is it time to cancel an unused credit card?
Canceling an unused credit card isn’t always a bad move. There are some situations in which canceling your card is worth the risk of dinging your credit.
You’re ready to move on from a starter card
When you’re new to credit, you’re often limited to starter credit cards designed to help you build a credit history with responsible spending and on-time payment. These cards can be the financial stepping stones to stronger, more rewarding credit cards — including cards offering cash back or points.
Since starter cards don’t typically come with high credit limits, the impact of canceling them is usually minimal. But you’ll only want to close the starter card after you’ve established a stronger credit score and explored any options to upgrade your card with the issuer. If there’s no option to graduate to a better card, then closing it might be a good idea.
You’re paying more than you get back in rewards
Premium rewards cards can be lucrative, but annual fees attached to them might be pricey. When the rewards or benefits aren’t outweighing the annual fee anymore, it might be time to close the card. You could also consider downgrading to a different card, like a no-fee rewards card that offers flat-rate cash back, premium perks or customized rewards.
You want to streamline your finances
Managing multiple cards makes sense for people who are organized and use them responsibly. But keeping track of annual fees, rewards bonuses and rotating categories and payments can quickly become complicated. If you’re ready to simplify your wallet, or don’t want the temptation to spend, you may want to close accounts you’re not using to focus on one or two cards for everyday spending.
You’re no longer with a spouse or partner
If you’re going through a divorce or separation, you may need to cancel the credit cards you shared with your partner to cleanly separate your future finances. If your partner is an authorized user on your card, you don’t have to cancel the card. Just call your card issuer and request to remove them from your account.
Alternatives to canceling your credit card
Canceling isn’t the only option for a card you’re not using anymore. If you’ve weighed the impact of closing your card and decided it’s best to keep it, there are a few alternatives to consider that can preserve your credit history and keep your credit line intact.
Downgrade to a card with no annual fee.
If you’re sick of paying a hefty annual fee, you could save money by switching your card to a different card with the same issuer. Many card issuers offer no-fee versions of their premium credit cards. With a brief call to customer service, you can convert your card to a more cost-effective option. This alternative also allows you to keep your original credit line untouched in most cases, so your credit score doesn’t suffer.
Upgrade to a card that better fits your lifestyle. If your current card isn’t cutting it, you may want to trade it for one with stronger rewards that better fits your new spending habits. If you upgrade with the same issuer, you might get to keep your original credit line. Just remember with upgrades (or downgrades) you won’t be eligible for a welcome offer or intro APR with the new card.
Transfer your balance to a 0 percent intro card. Canceling a card won’t erase the balance you owe. You can cancel the card — meaning you won’t be able to use it for new purchases — but you’ll still need to pay off any existing balance. If you’re worried about a high APR, consider transferring large balances to a new card offering no interest for a specified time. The best balance transfer cards offer a 0 percent APR for up to 21 months, potentially saving you a bundle on interest.
Use your card sparingly to keep your account open. An active credit card can help you balance your credit utilization ratio, maintain a broad credit mix and extend the age of your accounts — all of which support strong credit. A common tactic for keeping an older card open is to schedule an automated payment for a small bill like a streaming service and set up an autopay to cover the monthly balance.
The bottom line
The decision to keep or close a credit card account depends on your overall credit and how much impact the drop in score could have on your financial goals. If you’re not using a credit card regularly, consider alternatives such as downgrading to a card with no annual fee or upgrading to a card that better fits your lifestyle. Doing this can help maintain a strong credit score while avoiding the risks of closing your card.
Frequently asked questions
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