You don’t use it anymore, it doesn’t have very good rewards and you simply do not want that old card anymore; but don’t cancel it. People cancel their old credit cards all the time, but it’s almost never a good idea. Some do it so that they can prevent themselves from using the card anymore. Others do it because they have new cards and this old card from a decade ago is pretty much obsolete these days. There are so many reason people cancel old cards, but that does not mean you should do it. It could actually cost you far more than you realize, and sometimes that cost is more than you can afford.
If your account is in good standing, you need that account on your credit report to show a longstanding credit history. If you have had that card for years and years but the rest of your credit is fairly new, you might find that your credit history looks much shorter – which could prevent you from obtaining some loans.
Your Overall Credit
Let’s say you have two credit cards to your name. Old card is the one you want to cancel, and it has no balance and a $5,000 available credit limit. You have a newer card with a $10,000 available credit limit and a $5,000 balance on that card. To the credit bureau, you have $15,000 in credit and you have only used a third of that. That’s about the maximum you want to show as utilized. If you close that old account and lose that $5,000 available credit, you look as if you have maxed out half your available credit. It doesn’t look good.
At the end of the day, it is something you might need to sit down and really figure out. Will cancelling this old card hurt me that badly? Will it make my credit utilization look a lot worse than it really is? Do I have enough older credit to make up for canceling this old account?
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