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Like most financial decisions, the answer to the question of how long to keep your credit card depends on a number of factors.
Hey there credit card aficionados!
Ever wondered how long you should hold onto a credit card? Well brace yourselves for some eye-opening insights. In this comprehensive guide, we’ll delve into the intricate world of credit card longevity uncovering the secrets to maximizing your rewards and safeguarding your credit score.
Hold Your Horses: Don’t Cancel That Card Just Yet!
Contrary to popular belief there’s no magic number for how long you should keep a credit card. In fact, you can hold onto it indefinitely if it serves you well. As long as you’re using it regularly and keeping your account in good standing, your issuer won’t bat an eyelid.
But Wait, There’s More!
Since it immediately lowers your available credit, canceling a credit card can have a negative effect on your credit score. This may result in a higher credit utilization ratio, which is responsible for 200% of your credit score.
The Credit Utilization Conundrum
Let’s break down the credit utilization ratio. It’s the percentage of your available credit that you’re actually using. A high ratio indicates that you’re close to maxing out your credit, which can make you seem like a risky borrower to lenders.
The Age-Old Dilemma: Closing vs. Keeping
Even though canceling a credit card can lower your score, there are some situations in which it might be the best course of action. For instance, it’s not worth keeping a card that charges an annual fee if you’re not using it. It’s costing you money, and you’re not getting any rewards in return.
But Remember, Age Matters!
Closing a credit card you’ve had for a long time doesn’t immediately shorten your credit history. A closed account with positive information can stay on your credit report for up to 10 years. However, it will affect the average age of your open accounts, which could impact your credit scores.
The Bottom Line: A Balancing Act
So, how long is too long to keep a card? The answer is: there’s no such thing! If you’re happy with your card and getting a lot of value out of the rewards, there’s no harm in sticking with it. Likewise, if you’ve stopped using a card and it doesn’t charge an annual fee, it’s generally preferable to keep the account open.
But Don’t Get Complacent!
The credit card landscape is constantly evolving, with new and exciting cards hitting the market all the time. Once a year or so, it’s a good idea to take a peek at what’s out there. You might find a card that trumps your current one in terms of rewards, benefits, or fees.
Remember, Your Needs Evolve Too!
As your financial and personal life changes, so too should your credit card needs. A card that once fit your lifestyle perfectly might not be ideal five years later. So, don’t be afraid to reevaluate your options and find a card that aligns with your current goals and spending habits.
Closing a Card: The Right Way
If you do decide to close a card, make sure it’s paid in full and you’ve redeemed all available rewards before contacting your issuer’s customer service. Otherwise, closing the account will be difficult, and you might end up forfeiting valuable points or miles.
Parting Words of Wisdom
Remember, credit cards are powerful tools that can help you build credit, earn rewards, and manage your finances effectively. By understanding how long to keep a credit card and how to close one responsibly, you can maximize your benefits and minimize any potential risks to your credit score.
Now, go forth and conquer the world of credit cards!
If you want to, you can (and maybe should) keep a credit card indefinitely
First, it’s important to understand that you can keep your credit card indefinitely if you really want to. Your card issuer probably won’t close it for you as long as you use it frequently and maintain good credit. If you like your card and want to keep using it, go right ahead.
Even if you’re not using your credit card, there are valid reasons to exercise caution when closing it. Your credit scores may suffer if you cancel a card because you will immediately have less available credit. If you’re carrying a balance on other cards, your credit utilization ratio will shoot up. This could hurt the 30% of your credit score that’s determined by amounts owed.
Closing a credit card you’ve had for a long time doesn’t immediately shorten your credit history. A closed account with positive information could stay on your credit report for up to 10 years. However, closing a card will change the average age of your open accounts, which may have an impact on your credit scores. And when that old closed account drops off your credit report, that could have an impact, too.
The case for closing a card from time to time
Closing a credit card can lower your credit scores, but there are situations in which it makes sense to do so.
For instance, it makes no sense to keep a card if you have one that you aren’t using and it is costing you an annual fee. It’s costing you money, and you’re not able to counterbalance the expense by racking up big rewards. By paying off the balances on your other cards before canceling this one, you can lessen the negative effect it has on your credit score if it has a high credit limit. That way, your credit utilization ratio will stay in check, despite the cut to your available credit.
There’s also something to be said for canceling cards you don’t use and that have small credit limits (like retail credit cards, for instance). Keeping track of a bunch of cards starts to become a challenge over time, especially in an era of concern about fraud and identity theft. Getting rid of a few low-limit cards shouldn’t affect your credit very much and could provide some peace of mind.
Before contacting your card issuer’s customer service number to cancel a card, make sure it has been fully paid for and all of the available rewards have been used. Otherwise, closing the account will be difficult, and you might end up forfeiting valuable points or miles.
Should I Close a Paid Credit Card Or Leave It Open?
FAQ
Does cancelling a credit card hurt your credit?
How long can you not use a credit card before they close it?
What happens if I cancel my first credit card?
How do I close my credit card without hurting my credit?
Can I reopen a closed credit card account?
It may be possible to reopen a closed credit card account, depending on the credit card issuer, as well as why and how long ago your account was closed. But there’s no guarantee that the credit card issuer will reopen your account. For example, Discover says it won’t reopen closed accounts at all.
How long does a closed credit card account stay on your report?
Negative information will disappear from your account in seven years, and accounts closed in good standing will remain on your report for 10 years. Reopening a closed account is a fairly straightforward process. Not every credit card issuer allows it, but if it does, it will typically require you to make the request within 30 days of the closure.
Can a credit card account be closed?
There are many reasons why a credit card account could be closed—from inactivity to fraudulent activity to over-limit as well as for personal reasons. Should you need to reopen your account, you may be able to do so by discussing it with your card issuer.
Can I Close a credit card early?
There’s actually no reason to close a card early instead of waiting until the annual fee posts. Most issuers give you a grace period of 30 days or so after the fee posts, during which you can get the fee refunded if you decide to cancel the card.