Ever think a credit card has no more use for you? While it may seem like canceling or closing that credit card is a great way to close that chapter of your life, it actually causes more harm than good.
In short, credit cards should never be canceled because the longer a credit card is open, the better it will be for your credit history, and closing the card means it drops off your credit history. Credit bureaus want to see you utilize your credit responsibly and have a long history of using that credit. If you close your credit card, it can no longer help you paint a story of good, long credit.
Let’s bust a few myths about canceling credit cards:
Myth: If I don’t need a credit card, I should just cancel it because I’m not using it.
Fact: Just because you don’t use it doesn’t mean that it does any harm just sitting there. In fact, keeping it open is better for the reasons given above.
Myth: Canceling a credit card means I get a higher credit score because I’m paring down on open credit lines, which makes me look more creditworthy.
Fact: That’s false – it works the other way around. The more credit you have open, and the more self-control you have over your credit line, the better it looks to credit bureaus.
Myth: I need to cancel my credit card because it has a high annual fee and I don’t want to pay for it.
Fact: Even if the annual fees are too much to pay for, there’s likely a different credit card product offered by the same issuer with no annual fee ($0). You can get your credit card changed from one product to the other. Sometimes, you keep the same credit card number, and typically, you’ll keep the same credit limit as before. You’ll always keep the same account on the books this way, though. This means there’s ultimately no need to close the credit card.
Examples of product changes:
- Chase Sapphire to Chase Freedom
- American Express Platinum to Blue Cash Everyday