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Should You Close Old Credit Card Accounts?

By Nathan Hamilton and Michael Douglass – Apr 10, 2017 at 7:54AM

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This is one of the most-asked credit card questions.

To close or not to close your credit card accounts. That is the credit score question.

In the previously recorded Facebook Live video segment below, Motley Fool analysts Michael Douglass and Nathan Hamilton answer a user-submitted question about when to close old credit card accounts.

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Michael Douglass: We'll do one more because this is a really good one. It's from Jennifer, and she asks...I'm just going to summarize as best I can. Switched from Wells Fargo to a credit union, transferred credit card balance to a low-interest card as a starting point to pay it all off. Before closing her account with Wells, she was advised to just keep the line of credit open and not use it because it helps her credit. We've talked about credit utilization, so this kind of gets into that.

Is that good advice, or does it make better sense to close that card? Of course, one thing that she mentioned is she's got a good credit score and hasn't had any issue abstaining from using that credit since. That's really important, of course, because if you have two accounts open and you're like, "I guess I'll just use both," obviously that would not be great. Your thoughts?

Nathan Hamilton: First off, I'll just say congratulations, Jennifer, transferring to a low-interest card and managing your credit score well. For the closed account, generally it does make sense, if you are not incurring an annual fee, to keep that account open. There's no harm in doing so for the most part if she's not tapping it for credit.

Douglass: It shows age of account. They don't necessarily want to see, "You've been on a credit card for six months, and you were on a credit card before that for six months and before that for six months." It's kind of almost a little bit like having a job. You don't want to be floating from job to job.

Hamilton: Looking at, you mentioned account age. That is also a factor that is accounted for in your FICO score, so to have the best credit scores out there to really get your credit score rocking, what FICO wants to see is an average credit age of at least five years. As she keeps that account open, even if it's not incurring an annual fee, if there's no cost of keeping it open, then I would say in most any scenario, it's going to make sense to leave it as is.

Michael Douglass has no position in any stocks mentioned. Nathan Hamilton owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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