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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: ALPA PROD/Shutterstock.com May 13, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Joey Robinson is a credit cards contributor for Bankrate and upon graduating with a Bachelor’s degree concentrated in Finance, Joey worked at “Big Four” (Ernst and Young) accounting firm before exploring the world of credit cards. Over the past two years, he’s shared his expertise and has brought understanding to complex topics as a writer and editor for sites like Bankrate, CreditCards.com and NextAdvisor. His advice on avoiding common credit card fees, top balance transfer tactics and more financial tips have been featured on MSN Money and other various news publications. Highlights Investigative and political journalism Delivered on-the-ground news Newscast Production Experience Dignelly is an Associate Editor for CreditCards.com where she is dedicated to updating information for readers. She obtained her master’s degree in broadcast and digital journalism from Syracuse University in New York. During that period, she gained a variety of experience from her time interning with Tampa Bay’s NBC News affiliate station WFLA-TV News Channel 8 and their Spanish digital news outlet Tampa Hoy. Dignelly’s interest in finance has brought her here to join our news and advice team from Puerto Rico. She is committed to keeping you informed and updated with the latest financial news and information. Bankrate logo

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Why you shouldn t cancel unused credit cards

Keeping an old credit account active may seem like a meaningless task, but doing so can boost your credit score for several reasons. According to FICO’s estimated model, your is made up of and weighted as follows: Payment history (35 percent): The most important factor of a credit score, your will be a focus of credit issuers. Credit utilization ratio (30 percent): Typically shown as a percentage, this figure represents the balance of your accounts compared to your total available credit limit. Length of credit history (15 percent): The average is the third biggest factor of your score. New credit (10 percent): will appear as inquiries on your credit report, as well as whether accounts have gone delinquent and other activity in the past 3 to 6 months. Credit mix (10 percent): A variety in the different you have can boost your score. Maintaining your old credit card account can set you up for success in every single one of these categories. By making small payments every so often to keep the account active, you’ll be balancing your (low activity is better than no activity), maintaining a broad credit mix and extending the age of your credit accounts—all good things for your credit score. On the other hand, an inactive card means your payment history is hurting. If you stop using the card altogether, there’s a chance that your account will be closed (typically after at least 12 months of inactivity). This will appear on your credit report and drop your score, so it’s vital to keep your account active and make the payments needed to keep your account in good standing.

How canceling an unused credit card affects your credit score

Canceling a credit card can impact your credit score, but not straight away. A closed account will stay on your credit report for up to 10 years. When the closed account falls off your report, your average age of accounts will likely take a hit and your total credit limit will decrease, which will hurt your credit utilization ratio. The general guideline for your utilization is to keep it under 30 percent, but those with excellent credit keep it around 10 percent or less. Additionally, closing this credit account may reduce your mix of credit, which is another factor that contributes to your credit score. In addition to avoiding the toll on your credit score, having an open account with an old card won’t take away from the benefits of your new one. Set yourself up for success by keeping your credit card active with routine payments to raise your credit score.

What to do with unused credit cards

Keeping an active hands-off credit account can be a blessing to your credit score if you’re able to make the necessary payments. One easy way to manage an account is to set the card up as payment for a recurring monthly expense such as utility bills, subscriptions or streaming services. By setting up automated payments with your issuer to pay off this balance in full each month, you’ll improve your credit utilization ratio, the average age of your accounts and set a trend of on-time, in-full payments. Putting the card away and setting reminders to spend occasionally can be another way to boost your score. Make sure to enable automated payments to cover the balance each month.

When you should cancel an unused credit card

If you have an unused card and your credit issuer has sent you a notice that your card is going to close due to inactivity, make a payment to keep the account open to buy enough time to weigh your options. If your bank has already deactivated the account, contact them to see if you can negotiate. If your account was otherwise in good standing, your issuer is likely open to the idea of keeping a customer’s account active. One of the most common reasons for canceling a credit card is if the card has an . If the yearly fee isn’t worth the positive impact of keeping an open credit account, you might want to cancel it. In this case, however, you can also request a product change to a lower tier card that may offer similar benefits without the fee—that way you can keep your account and ditch the extra expense. Also, if the ease of swiping a credit card sends your spending habits out of control, reevaluate being a cardholder. If your credit card is causing extraordinary financial stress, cut ties with the card. With and most other scenarios, you’ll be better off keeping your account open and active. Maintaining the account can be hands-free and will help your financial health.

How to cancel your credit card

Ultimately, the decision is up to you, but be mindful that there are specific to take when closing a credit card and some financially-savvy tips to consider. Pay off the balance: If you try to cancel a card with a balance, the issuer could raise your interest rate to the maximum allowable by law as a penalty for closing the account. Contact the issuer: Call the number on your monthly statement, confirm that your balance is zero and notify the representative that you’re canceling the card. Follow up with a letter: The letter should say that you’re closing your account and that you want your credit record to reflect that you’ve requested the account be closed. Most people won’t keep every card they’ve ever opened. So, here are a few recommendations for those times when you need to dump a card: Spread out closures over time so that your utilization doesn’t spike. Keep your oldest account open to preserve your length of credit history. Keep cards with high limits open. Don’t close credit card accounts right before .

The bottom line

Closing a credit card is a personal decision that should only be made after considering the effects that this may have on your credit score. Do the benefits outweigh the drawbacks of hurting your score? Once you have this clarified, your decisions will be based on your needs and financial health. SHARE: Joey Robinson is a credit cards contributor for Bankrate and upon graduating with a Bachelor’s degree concentrated in Finance, Joey worked at “Big Four” (Ernst and Young) accounting firm before exploring the world of credit cards. Over the past two years, he’s shared his expertise and has brought understanding to complex topics as a writer and editor for sites like Bankrate, CreditCards.com and NextAdvisor. His advice on avoiding common credit card fees, top balance transfer tactics and more financial tips have been featured on MSN Money and other various news publications. Highlights Investigative and political journalism Delivered on-the-ground news Newscast Production Experience Dignelly is an Associate Editor for CreditCards.com where she is dedicated to updating information for readers. She obtained her master’s degree in broadcast and digital journalism from Syracuse University in New York. During that period, she gained a variety of experience from her time interning with Tampa Bay’s NBC News affiliate station WFLA-TV News Channel 8 and their Spanish digital news outlet Tampa Hoy. Dignelly’s interest in finance has brought her here to join our news and advice team from Puerto Rico. She is committed to keeping you informed and updated with the latest financial news and information.

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