What Happens When You Close a 15-Year-Old Credit Card

Vonbon Hill

2 min read

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23-11-2024

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Closing a credit card, especially one you've held for 15 years, might seem like a simple decision, but it has significant implications for your credit score and financial standing. Understanding these consequences is crucial before making a move.

The Impact on Your Credit Score

Your credit score, a three-digit number representing your creditworthiness, is heavily influenced by the age of your credit accounts. A 15-year-old credit card contributes substantially to your credit history length, a key factor in your credit score calculation. Closing this account will:

• Shorten your credit history: This immediately reduces the average age of your accounts, potentially lowering your score. The impact depends on the age and number of your remaining accounts.
• Reduce your available credit: Closing a card reduces your total available credit, increasing your credit utilization ratio (the percentage of your available credit you're using). A high utilization ratio negatively impacts your credit score. Even if you pay your balance in full each month, closing a card can still hurt your score.
• Potentially affect your credit mix: Credit bureaus consider the variety of credit accounts you have (credit cards, loans, etc.). If this card represents a significant portion of your credit mix, closing it could slightly impact your score.

When Closing Might Be a Good Idea

Despite the potential drawbacks, there are circumstances where closing an old credit card might be justifiable:

• High annual fees: If you're paying significant annual fees for a card you rarely use, the cost might outweigh the benefits to your credit score.
• Unnecessary cards: If you have numerous credit cards and only use a few regularly, consolidating your credit might be a worthwhile strategy.
• Cards with negative associations: If the card is associated with bad spending habits or a period of financial difficulty, closing it could help you move forward.

Before You Close

Before making a final decision, consider these factors:

• Check your credit report: Review your credit report to see your current credit score and how this card impacts it. Consider the potential effects of closing the account.
• Contact your creditor: Some credit card issuers might offer alternative solutions, such as lowering your annual fee or changing the card to a no-fee variant.
• Evaluate your alternatives: Determine if you have sufficient alternative credit accounts to compensate for the loss of this card’s positive impact on your score.

Conclusion

Closing a 15-year-old credit card is a decision that shouldn't be taken lightly. While it might seem like a small action, it can significantly affect your credit score and financial health. Weigh the pros and cons carefully, and consider the advice mentioned above before taking any action. A well-informed decision will help you protect your creditworthiness in the long run.