Should You Ever Close an Old Credit Card? – Key TipsBetter rates and more rewards entice us to apply for better credit cards. But what should you do with an old card? Debt management can be tricky if you’re tempted by all your cards. It seems like the obvious solution is to just cancel the old card. But before you do that, it’s important to understand how canceling a card can impact your credit.
How Credit Reports WorkCredit reports look at five important areas:
- Payment history
- Credit utilization
- Credit history
- New credit
- Types of credit
Peace of MindDespite the potential blow to your credit report, your unique situation may warrant canceling a credit card. If you’re no longer using the account, you might not log in regularly to view activity. If you’re not paying attention to what’s happening to that card, you’re at greater risk for identity theft. If the card doesn’t have a lengthy credit history or high limits, it might be safer to close it. Whether or not you close a card should also be dependent on your behavior. If you know you’ll have a hard time resisting using that card, you’ll probably be better off removing that temptation entirely.
Important Things to Consider
- It’s fine to have several credit card accounts open, as long as you’re not tempted to use them all
- If you do close your card, be sure to pay off the balance and redeem rewards prior to canceling
- Don’t forget to change any automatic payments on your old card
- Don’t close a card before a major purchase