Should You Keep an Old Credit Card?

The question of whether to keep an old credit card open or close it can be a bit of a conundrum.

Your credit history is a vital component of your financial health, and the decisions you make regarding your credit cards can have a significant impact on your credit score and overall financial well-being.

Let’s dive into the considerations to help you make an informed decision.

Your credit history

One of the key factors in determining your credit score is the length of your credit history. The longer you’ve had credit accounts, the better it reflects on your creditworthiness.

If the old credit card is one of your oldest accounts, closing it could potentially shorten your credit history and, in turn, affect your credit score.

Credit utilization refers to the amount of credit you’re using compared to your total available credit.

Keeping an old credit card open can help keep your overall credit utilization ratio lower. Closing the card might decrease your available credit, causing your utilization to rise, which could negatively impact your credit score.

Payment history

Your payment history, including whether you’ve paid your bills on time, is a significant factor in your credit score.

If the old credit card has a positive payment history, leaving it open can contribute to your overall positive track record.

Fees vs. benefits

Consider whether the old credit card has an annual fee and whether the benefits it offers are worth the cost.

If the card has no annual fee and provides useful perks, like rewards or travel insurance, keeping it open could be beneficial even if you don’t use it frequently.

Credit mix

Lenders like to see a diverse mix of credit types on your report, including credit cards, loans, and mortgages.

If the old credit card is your only credit card, closing it might reduce the variety of credit types you have, potentially impacting your credit mix.

Inactivity and security

If the old credit card is rarely used and you’re concerned about potential fraud, consider using it occasionally for small purchases and promptly paying off the balance.

This can help keep the account active and mitigate security risks.

Making the decision

Deciding whether to keep an old credit card open requires a thoughtful assessment of your individual financial situation.

If the card has a positive history, no annual fee, and contributes to a healthy credit mix, keeping it open can be a wise choice. However, if the card carries fees you’re not willing to pay or if its presence tempts you into unnecessary spending, closing it might be the better option.

As you navigate this decision, keep in mind that your credit score is just one aspect of your financial picture.

Balancing your credit choices with your broader financial goals will ensure that you’re making a decision that aligns with your overall financial well-being.