How Long Should You Keep That Credit Card Open?

Key takeaways

• You can maintain an active credit card account for as long as you wish without any restrictions.
• Shutting down a credit card may reduce the average length of your credit history and elevate your credit usage rate — actions that could negatively impact your credit score.
• Other options instead of canceling a credit card involve switching to a card that has no yearly charge or exchanging it for one that more closely matches your current way of living.
• Utilize your card for at least one transaction each quarter to maintain its activity and bolster your robust credit history.

Perhaps you're just starting with credit and aren’t certain about how long you should retain a credit card once you've opened a new one. Alternatively, you may be contemplating when it's best to retire a card that no longer suits your needs. There isn't a single correct duration for keeping a card; instead, it hinges on your broader credit situation and the possible effects—such as a dip in your score—that shutting down the card might have concerning your monetary objectives.

It can be useful to evaluate both the advantages and disadvantages of shutting down your credit card and explore different ways to avoid cancelling your account. Furthermore, there are clever choices available should you wish to maintain an active account.

For how long is it advisable to maintain a credit card account?

As long as you maintain good standing, there’s no restriction on how long you can keep a credit card account active. Keeping an account open for a longer period significantly benefits your credit score because it contributes to the length of your credit history. length of your credit history And adds to your credit utilization ratio.

Based on the length of your credit history and how long you've owned the card, it might be wise to hold onto it despite not using it frequently anymore.

What impact does shutting down a credit card have on your credit record?

The greater the length of your credit history, the more positively it influences your credit score. The duration of your credit history is a crucial factor in determining your credit score and makes up 15% of your FICO score.

For instance, if you possess a credit card that's two decades old, whereas all your other cards are relatively new with just single-digit birthdays, this particular card significantly influences the overall maturity of your credit history. Canceling it could lower—possibly quite considerably—the mean age of your credit background.

What impact does shutting down a credit card have on your credit usage percentage?

Cancelling your card can reduce your total credit limit, potentially raising your utilization ratio. credit utilization That makes up an additional 30% of your FICO score.

Even if you've owned your credit card for just a short time, your credit score still gains an advantage from the associated credit limit. This is due to how your credit utilization ratio works; it measures the proportion between your accessible revolving credit and your outstanding revolving debts. As such, canceling a card with a substantial credit limit could significantly reduce the total credit at your disposal, potentially pushing your debt above the advisable threshold of 30% of your overall credit availability. Consequently, this may lead to a decline in your credit score.

At what point should you decide to close a dormant credit card account?

Cancelling a dormant credit card doesn't necessarily always turn out badly. There are certain circumstances where this could be true. canceling your card is worthwhile despite the potential hit to your credit score.

It’s time for you to upgrade from your beginner credit card.

When starting with credit, you typically face restrictions. 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.

Because initial cards generally do not have generous credit limits, their cancellation often has little effect. However, you should consider waiting until after securing a higher credit score and investigating possibilities for upgrading the card with the provider. Should there be no chance to move up to a superior card, then shutting down the starter card could be sensible.

You're spending more than what you receive in return through rewards.

Luxury credit cards come with tempting perks, yet their yearly charges can add up. If the advantages they offer stop justifying those costs, closing the account may be warranted. Alternatively, you might want to switch to another card with lower fees without losing your current line of credit. no-fee rewards card This provides flat-rate cashback, top-tier benefits, or tailored rewards.

You aim to simplify your financial management.

Handling several credit cards works well for those who are disciplined and keep things orderly. However, juggling yearly charges, reward incentives, changing categories, and payment schedules can get complex fast. Should you wish to declutter your finances or avoid the urge to overspend, consider simplifying your card collection. close accounts you're not accustomed to concentrating on just one or two cards for everyday spending .

You're now single and not partnered.

If you're experiencing a divorce or separation, you might want to terminate the joint credit cards you share with your spouse to clearly divide your upcoming financial matters. However, should your spouse be only an authorized user on your card, cancellation isn't necessary. Simply contact your credit card company and request to remove them from your account.

Options for Avoiding Cancellation of Your Credit Card

If you're considering what to do with a card you no longer use, canceling isn't your sole choice. After assessing the effects of closing your account and concluding that retaining the card might be better, several options could help maintain your credit history and retain your available credit limit.

Switch to a card that doesn’t have an annual fee.

If you're tired of coughing up a large yearly charge, switching might help you cut costs. switching your card To another card from the same provider. Numerous card issuers provide fee-free editions of their high-end credit cards. By making a quick phone call to customer support, you can switch your current card for one that has lower costs. Typically, this change lets you maintain your initial credit limit, thus preventing any negative impact on your credit score.

Switch to a credit card that aligns more with your daily life. If your present card isn't meeting your needs, consider exchanging it for one that offers more robust rewards and aligns better with your updated spending behavior. update using the same issuer , you may retain your initial credit limit. Keep in mind that when upgrading (or downgrading) cards, you won’t qualify for a welcome offer or introductory APR on the new card.

Move your balance to a credit card with a 0% introductory rate. Cancelling a card will not eliminate the debt you have accrued. While you may stop using the card for additional buys after cancelling it, you remain responsible for settling your current outstanding balance. Should you be concerned about a steep APR, think about moving significant balances to another credit card with an introductory period of zero percent interest. best balance transfer cards provide a 0 percent APR for as long as 21 months, which could help you save significantly on interest costs.

Use your card moderately to maintain an active account. A functioning credit card can assist in managing your credit utilization ratio, maintaining various types of credit, and prolonging the average age of your accounts—all factors that contribute to robust credit scores. Often, people keep an old card active by setting up automatic payments for minor expenses such as a streaming subscription. set up an autopay To meet the monthly requirement.

The bottom line

Whether you should retain or shut down a credit card account hinges largely on your total credit situation and the potential effect a dip in your score might have on achieving your monetary objectives. Should you find yourself rarely utilizing a particular credit card, explore options like switching to one without an annual charge or transitioning to a more suitable option based on your current way of life. This approach allows for sustaining a healthy credit rating whilst sidestepping the hazards tied to terminating your card agreement.

Frequently asked questions

• What is the frequency at which I should use my card to maintain its activation?

  Depending on who issued the card, you ought to make at least one transaction with it every few months to maintain its activity. A minor purchase can be sufficient to demonstrate to your credit card provider that you're still engaged with the card.

  If the card hasn't been used for some time, you might be vulnerable to actions taken by your credit issuer. shutting down the card due to lack of activity If that occurs, it might damage your credit rating.

• What level of risk is involved when closing a credit card within the initial twelve months of opening my account?
  If your card hasn’t been active for a full year yet, shutting it down will shorten your overall credit history and may raise your credit utilization rate — actions that might harm your credit score. This decision could complicate things when applying for new credit cards later since approval might become harder. Instead of canceling the card, consider options like exchanging it for an alternative from the same provider.
• Can not using my credit card affect my credit score negatively?
  Failing to use your card won't harm your credit score. Nonetheless, an unintended consequence of infrequently utilizing your card (at least a couple of times annually) might be that your credit card company decreases your credit limit or even closes the account entirely. Both outcomes have the potential to affect your credit score.