Close these credit cards?
October 24, 2012 2:31 PM   Subscribe

Credit cards - which to keep open, which to close?

I have read on askme and elsewhere that it's good to keep $0 balance credit cards open, both for a higher debt to credit limit ratio and for a older average credit card age. But, what about cards opened more recently that I no longer use?

In February of this year, I opened 3 new credit cards with a total combined limit of $17,000 (see my previous questions if you're curious as to why I opened these cards). I have now paid off all balances on the 3 newer cards except for around $3k remaining on one with a limit of $9k. Should I close the other two (and close that one once I pay it off)? They are obviously bringing down the "average age of open lines" component of my credit score and will possibly get closed by the issuers anyway due to lack of use. But, is it worth having a larger credit to debt ratio? I only have 1 other card, which has been open since 2005 with a limit of $7,500 that I use and pay off every month (about $1000 a month). I find things much easier and simpler to just use this one card every month, rather, than charging a little to each just so they don't get closed. But, I don't want to harm my credit score, especially if credit card companies don't close inactive accounts very often. Advice?
posted by sunshine37 to Work & Money (10 answers total) 4 users marked this as a favorite
Never close a line of revolving credit once it's been issued. Cut up the card if you don't want to use it anymore.
posted by erst at 2:56 PM on October 24, 2012 [1 favorite]

I disagree with erst. Sometimes cards start charging very high annual fees, and a possible ding to the credit rating is worth it. It can cost $70/year to keep a zero-balance line of credit open.
posted by croutonsupafreak at 3:28 PM on October 24, 2012

Well of course, if a card costs you money to keep open, close that card. I assumed that went without saying, sorry.
posted by erst at 3:33 PM on October 24, 2012

I agree with what erst says, and that saying is also widely cited. So just cut up your cards if they are not charging you annual fee. When they start to charge, they will let you know by email or mail; otherwise, there is no annual fee.

Cancel a line will temporarily reduce you credit score, but I am not sure how much or how long the effect would be.
posted by onkyo at 3:33 PM on October 24, 2012

The general rule of thumb I've always been told is to keep your oldest credit card open because old credit is good credit in terms of helping your credit score, and close all the newer ones.

So if I were you I'd keep the 2005 card, and close the rest.

(Disclaimer: I am not an accountant!)
posted by 168 at 5:43 PM on October 24, 2012 [1 favorite]

It won't disappear from your report when you close it, so closing it won't make your average age go up.
posted by wierdo at 6:57 PM on October 24, 2012

There's some useful information to poke around on this site.
for instance here:

Besides the information, I like the service, too, for analyzing your credit score. There are competitors (e.g., creditsesame) but this is just the one I wound up with. I was satisfied with their privacy policy.
posted by spbmp at 8:58 PM on October 24, 2012

I have credit card accounts that I haven't used in YEARS that they have never made any noise about closing. Conventional wisdom is never to close accounts that don't charge you an annual fee and many cards that do charge a fee will agree to waive the fee when you call to cancel the card. On balance leaving the card open and improving your debt to available credit ratio is the best thing for your credit score.
posted by Lame_username at 9:10 PM on October 24, 2012

I am a banker. IANYB. Our understanding is, keep the oldest ones with the largest credit limits, and keep at least three tradelines open (mortgage can be one of them). Reason? Oldest for obvious reasons. Largest limit because part of the FICO score is the proportion of balances to limits (lower balances to higher limits is good), and three tradelines because many banks require a 12 month history on 3 tradelines before they will give you a mortgage. YMMV.
posted by brownrd at 9:55 PM on October 24, 2012

I would keep the card open, and randomize which one you use when you make new purchases. Having a good balance to limit ratio is good, so closing a card will hurt your credit.

If they're charging you an annual fee on either of the cards, you should consider calling them up and ask if they can change the a/c type to one which doesn't have an annual fee associated with it - note - you can convert, but don't close and reopen another account.
posted by bbyboi at 1:58 AM on November 3, 2012

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