Should You Cancel Your Credit Card in 2024?

In 2024, you may want to do some spring cleaning of your finances to help get you on the path to a more secure future. If you're taking a look at the big picture of your personal finances, you may find that you have some credit cards that you're no longer using.

If that's the case and you're tempted to just cancel the credit cards, be sure to truly understand what that involves and what the long-term implications of doing so could be. Here's what you need to consider to help you decide if you should cancel a credit card in 2024.

Does the card have an annual fee?

If your credit card has an annual fee, you want to make sure the cardholder perks justify paying it. For example, if you're paying $95 for an annual fee but you get a $100 airline incidental credit on your statement, the fee may be justified if you charge $100 in purchases on airlines over the course of the year --- but not if you never travel.

If you have a card with a fee that you aren't getting enough benefits from, then that's a pretty strong argument that you should cancel it. After all, why throw away money when there are free cards out there that wouldn't force you to do that?

How big of a hit will your credit score take?

Closing your card can hurt your credit score. But it's hard to know how much since that depends on a lot of factors.

Your credit score is determined based on factors like your payment history, amount of credit used versus credit available, and age of credit. If you close your oldest credit card or you close a card with $50,000 in available credit, your score is going to take much more of a hit than if you close a card you opened last year or one with a $500 limit.

Take a look at what the card is actually doing for you. If it's an older card or one with a long positive payment history, that's a strong argument for keeping it open.

Can you downgrade the card instead of giving it up?

Sometimes, card issuers allow you to downgrade a card, which means you can switch from a card with an annual fee to a similar one in the card issuer's lineup that doesn't come with this charge.

If you can do that, then you may want to opt to downgrade rather than close the card -- especially if it's one of your older cards or one that has a high credit limit and closing the card would have a big impact on your credit score.

Will you need to do any big-time borrowing any time soon?

Finally, you'll want to think about whether you are taking out a mortgage loan, a car loan, or any other large loan in the near future. If you're going to be taking on a lot of debt, you don't want your credit score to go down right before you do. In this instance, you may want to wait to close your card until after you've got the best possible rate on your big loan.

By answering these questions, you can decide if you should cancel a card in 2024. The bottom line is, if you're no longer using a card but it doesn't have an annual fee, it doesn't hurt to keep it open -- especially if you're going to be borrowing a large sum of money anytime soon.

If the card does have an annual fee, consider downgrading if possible instead of closing the card. If you can't do that, then you may want to cancel as long as you aren't planning on taking any big loans soon -- especially if it's a newer card or one with a low credit limit and your credit score won't be impacted too badly.