If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
If you have an old credit card sitting in the back of your wallet that you haven't swiped in years, you're probably familiar with the temptation to close a credit card. But closing an unused credit card account isn't always the best move.
In fact, unless the credit card comes with an annual fee, most experts will tell you to just leave the account open. But there are few one-size-fits-all answers when it comes to personal finance. And the question of should you close an unused credit card, or just continue to ignore it, isn't cut and dry.
Valid arguments exist for both sides of the debate. Closing a credit card can certainly hurt your score, but strategic planning can limit any damage. Closing an unused credit card could also be the right move if you're struggling to manage your credit card debt.
Although closing an unused credit card can hurt your credit score if you're not careful, some circumstances make it worthwhile anyway.
One major reason for closing an unused credit card is if that card comes with a pricey annual fee. That's not to say that all cards with an annual fee are bad -- they can be quite valuable when you make the most of them. But if you're not using the card, why are you paying for it?
Another time you may consider closing an unused credit card is if you simply don't want the temptation it represents. Every credit card you have is more credit card debt you could take on. If you struggle with managing debt, you may want to eliminate any cards you don't absolutely need.
It's also worth noting that if you don't use a credit card for a certain length of time, the credit card issuer may close your account on its own. So, if you really don't want your unused credit cards to be closed, it's a good idea to use them for a small purchase on occasion.
Depending on your situation, you may be able to close an unused credit card without impacting your credit score. For example, if you have multiple credit cards with the same issuer, it may let you transfer your credit limit from a closed card over to your remaining card.
Consider this hypothetical: You have two credit cards with the same issuer, one with no annual fee and a $3,000 credit limit, and one with an annual fee and a $5,000 credit limit. You want to close the card with the annual fee to save money. You can request that your issuer transfer the $5,000 credit limit to your other card before closing the account. That way you end up with a single credit card with an $8,000 limit.
Transferring your credit limit to another card conserves your total available credit, which keeps your utilization rate the same. However, keep the "length of credit history" category in mind. If the card you close isn't one of your oldest accounts, this can help your credit score remain the same after you close an unused credit card.
That being said, if the main reason you're thinking of closing an unused credit card is the annual fee, you may have other options. First, try negotiating with your issuer to waive the annual fee. Depending on how long you've had the account -- and how much the issuer wants to keep your business -- you may get a waived or reduced annual fee.
Alternatively, see if you can downgrade the card. Most cards with a high annual fee will have a lower-fee card with similar perks and rewards, and your credit card issuer may let you transform your expensive card into something more affordable.
Your credit score is calculated based on five factors. Two of those factors can be directly affected by closing an unused credit card:
We'll look at each of these below.
Length of credit history is basically how long you've been using credit cards, and it makes up 15% of your FICO® Score. More specifically, it's influenced by the age of your oldest account (the older the better), the age of your newest account (again, older is better), and the average age of all your accounts combined, among other time-related factors.
Closing an unused credit card causes that account to stop aging, which can negatively affect your average account age and hurt your credit. If the account you close is one of your oldest accounts, that damage can be even worse.
Your credit utilization ratio can be even more important than the length of your credit history. It's the portion of your available credit you're currently using -- how close you are to maxing out your credit cards. This is part of the "amounts owed" category of the FICO® Score formula, which is responsible for 30% of your FICO® Score.
Your utilization rate takes into account your debt-to-credit ratio across all accounts and your individual credit card balances as compared to their limits. Most experts recommend keeping these ratios below 30%, but the lower, the better.
Unused credit cards boost your credit score by reducing your credit utilization ratio. Let's look at an example of a person's hypothetical credit utilization ratio before and after closing an unused credit card with a $0 balance and $5,000 limit.
Total Available Credit | Total Balances | Utilization Rate | |
---|---|---|---|
Before closing unused card | $20,000 | $5,000 | 25% |
After closing unused card | $15,000 | $5,000 | 33% |
As you can see, in this example, closing an unused credit card caused the credit utilization ratio to rise above the 30% threshold even though they don't owe a penny more than they did before. This would likely result in a lower credit score.
We recommend comparing options to ensure the card you're selecting is the best fit for you. To make your search easier, here's a short list of standout credit cards.
Offer | Our Rating | Welcome Offer | Rewards Program | APR | Learn More |
---|---|---|---|---|---|
Rating image, 5.00 out of 5 stars.
5.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Discover will match all the cash back you’ve earned at the end of your first year. N/A | 1% - 5% Cashback Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases—automatically. |
Intro: Purchases: 0%, 15 months Balance Transfers: 0%, 15 months Regular: 17.24% - 28.24% Variable APR |
||
Rating image, 5.00 out of 5 stars.
5.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Up to $300 cash back Earn an extra 1.5% on everything you buy (on up to $20,000 spent in the first year) — worth up to $300 cash back. That's 6.5% on travel purchased through Chase Travel, 4.5% on dining and drugstores, and 3% on all other purchases. | 1.5% - 5% cash back Enjoy 5% cash back on travel purchased through Chase Travel, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 1.5% on all other purchases |
Intro: 0% Intro APR on Purchases and Balance Transfers for 15 months Purchases: 0% Intro APR on Purchases, 15 months Balance Transfers: 0% Intro APR on Balance Transfers, 15 months Regular: 20.49% - 29.24% Variable |
Apply Now for Chase Freedom Unlimited®
On Chase's Secure Website. |
|
Apply Now for Chase Sapphire Preferred® Card
On Chase's Secure Website. |
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
75,000 bonus points Earn 75,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's over $900 when you redeem through Chase Travel℠. | 5x on travel purchased through Chase Travel℠, 3x on dining and 2x on all other travel purchases Enjoy benefits such as 5x on travel purchased through Chase Travel℠, 3x on dining, select streaming services and online groceries, 2x on all other travel purchases, 1x on all other purchases, $50 Annual Chase Travel Hotel Credit, plus more. |
Intro: N/A Purchases: N/A Balance Transfers: N/A Regular: 21.49%-28.49% Variable |
Apply Now for Chase Sapphire Preferred® Card
On Chase's Secure Website. |
Here are some other questions we've answered:
In most situations, it's better to keep unused credit card accounts open, as closing credit accounts can have a negative impact on your credit score. However, there are a few situations where canceling an unused credit card can be a smart idea, such as when the card has an annual fee or if you're having trouble keeping your debts under control and you want to remove the possibility of taking on more debt.
Closing an unused credit card will typically cause your credit score to go down, at least in the short run. There are two reasons. First, the length of your credit history (including the average ages of your credit accounts) is a factor in all major credit scoring formulas. Second, eliminating an unused credit line can raise your credit utilization if you have balances on other accounts, which is one of the biggest credit scoring factors.
Our Credit Cards Experts
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.