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Pros and cons of dropping an old credit card

Do you have an old credit card you don’t use much, but you keep it open? Is there a right time to close that account?
Published: Mar. 8, 2022 at 11:29 AM EST
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InvestigateTV - Do you have an old credit card you don’t use much, but you keep it open? Is there a right time to close that account?

Having a credit card for a long time helps your credit score. Old credit cards, even with no balance on them, can increase the average age of your accounts which helps your credit score.

Sara Rathner, a personal finance expert with Nerdwallet, said if you close an old card, it could ding your score by a couple of points mainly because it lowers your total available credit limit.

Rathner said that, in general, experts recommend not spending more than 30 percent of your total credit limit in a billing cycle. Even less than 10 percent is ideal, so if your credit limit is suddenly lowered, but your spending remains the same, it’s that much easier to overspend.

“That being said, if you don’t want to pay an annual fee on a card, if you’re not getting value out of it anymore, you want to make room in your life for a different credit card. You can consider closing the old card,” Rathner explained.

That’s especially if you are getting charged an annual fee for a card you rarely use. If that’s the case before you close it, call up the company and see if it can move you to a different card with no fee.