Should you cancel a credit card you don’t use?

Closing an account may or may not be a good idea depending on your particular circumstances.

David Goldman/AP/File
Credit card logos are seen on a downtown storefront as a pedestrian passes in Atlanta.

The average American has around 3.7 credit cards. However, the spread can be massive, with some enthusiasts carrying as much as 30 cards at one time. Whether you’re on one end of the spectrum or another, the thought of closing an account may have entered your head. This may or may not be a good idea depending on your particular circumstances. We’ll go over all the questions and considerations you should be going through when deciding whether it’s time to part ways with a particular card.

Things to Consider

  1. Are you getting everything you can out of the card in question? While you may think a card is useless, you may be surprised about some of the things it can get you. Many credit cards on the market have hidden features. Take the time to go over your cardmember agreement or get on a call with customer service. They may make you aware of card benefits you didn’t know were there. For example, most cards don’t heavily advertise their auto rental insurance or price protection perks. If you have a rewards card, you should also figure out if there are any redemption options you didn’t know about – such as travel vouchers or cash back. These things can turn around your opinion as to whether you should close the account.
  2. Understand the implications this move has on your credit score. The average age of credit makes up 15% of your total FICO score. Closing old accounts will have a negative impact because it will drive this age down. This is especially true if the card you close was your very first account. Therefore, it’s recommended that you don’t close old credit cards unless it’s absolutely necessary. When is cancelling your card worth the hit to your credit? Anytime keeping the card around comes with a monetary cost, such as an annual fee. Remember that over time your credit score will recover. It’s not worth paying $50 or more per year just to keep the card around. If you aren’t planning on applying for a loan or anything else that might run a credit check on you should go for it.  
  3. Look for upgrade options. Some card issuers give users the option to upgrade their card to a new offer. Therefore, it’s possible that you can turn a credit card you think is useless into a better version, and vice versa. Your credit score might have improved greatly since you first opened the original account. If that was the case, you might have been locked out of certain options when you first applied. Call your issuer’s customer service line and ask about their other offers, and whether you can qualify for an upgrade. This method also works in the event you have a card with an annual fee that you want to get rid of. You can sometimes downgrade your card to one with no annual fee. Doing so will keep the original account so your credit doesn’t take a hit, and you can keep it around since it won’t be a financial burden.
  4. Before you cancel, call the customer retention line. Those who are set on closing their account can get one final bit of value out of their card. Call the customer retention line and tell them you are thinking about cancelling. Sometimes, they will give you a point bonus or reward to help incentivize you to keep the account active. In most cases, getting the reward will not lock you into any sort of contract. If you are still unsatisfied with the card after receiving your retention reward, you are still free to close your account down.
  5. Don’t forget to “withdraw” your rewards. The final thing to remember is that closing your account will result in a loss of all your reward points. Therefore, before you go through with canceling the card, make sure you redeem as many of the points as possible. Those who have airline mile cards are immune to this problem. All the miles you earn are tied to a frequent flyer account, not the card. Therefore, even if you close your account, the miles are likely to survive. However, make sure all the points posted to your frequent flyer account. It can sometimes take up to a week after you make a purchase for the miles to transfer over.

This story originally appeared on ValuePenguin.

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