Most credit experts advise against closing credit cards, even if you’re not using them because canceling a credit card has the potential to reduce your credit score.

If you have a card that you have not used for a while the provider may notify you that due to inactivity the account may be cancelled. You might consider cancelling the card since you don’t use it but here’s why you might want to keep the card open.

Length of Credit History

The length of your credit history makes up 15% of your credit score. Showing long held accounts in good standing has a positive impact on your score. If you cancel a card, you lose that history.

Credit Utilization

Credit utilization ratio is how much debt you have in relation to your total available credit. It signifies how much credit you are using. Keeping the credit utilization ratio below 30% shows that you can effectively manage your debt. A utilization rate of 10% or less leads to the highest credit score.

If you have a limited number of credit cards and you cancel one of them it can have a negative impact on your credit utilization ratio because it reduces your total available credit, which can significantly increase the percentage of credit you are currently using on your other cards.

Payment History

Payment history makes up 35% of your credit score, having a long-standing card with a positive payment record is important. Even if you use the card infrequently it can still benefit you.

Keeping an old credit card open might be beneficial. Take the card out a few times a year to pay a bill or make a purchase and pay it off in full. Or use it for a recurring charge so that you don’t have to think about it.

There are situations where closing a card may be beneficial in the long run, while you might take a negative hit on your credit score it may be minor if you have a lot of available credit and limited debt.

  • The card has an annual fee, closing the account will eliminate that expense.
  • All credit cards come with a security risk, if your account details are stolen you will spend time reporting the crime and resolving the charges.
  • Any open card can lead to debt if the account is not managed properly.
  • If you want to simplify your finances having a limited number of credit cards can help you do that.
  • The account was recently opened, canceling a newer card will most likely lead to a smaller drop in your credit score.
  • If you have a joint credit card account and the relationship has dissolved maybe during a separation or divorce you want to close the account.