If you’re like many people, it’s very likely that you have more than one credit card. In fact, you probably have several. According to recent studies, the average adult resident of the United States has about four credit cards.
Is that too many?
For consumers who have built up their credit over many years, their credit cards are an asset. With the many variations of rewards available to consumers today it’s wise to keep and use a few cards regularly so you can take advantage of their benefits.
But if you find yourself with a card that you don’t use then you’ve likely contemplated closing that account.
You should be aware, however, that there are situations where closing a credit account can actually hurt your credit score. If you have one too many credit cards and are thinking of closing an account, here are a few things you need to know before you proceed.
Why Close an Account?
Most people consider closing an account because they feel that a particular card is no longer needed. While that may be true in the sense that you don’t use it, you may still need that card, depending on how old the rest of your credit accounts are. How these unused cards affect your credit score is something that many consumers might not be aware of.
Which Accounts Should I Close?
If you’re thinking of closing a credit account there are few things to consider. First, if you have a card that you don’t use that’s not always a good reason to close it. If this card has a high annual fee and a higher interest rate than your other cards, however, closing the account might be a wise choice.
But before you do, have a chat with a customer service agent. If you’ve maintained this card in good standing you may be able to negotiate to have the annual fee waived — and if that’s the case, keep the account open as you’re no longer losing money. Additionally, always consider the best credit card offers when opening a new account and look toward ones that don’t come with annual fees, if you’re not sure how much you might actually use the cards.
Are There Accounts I Should Never Close?
Ultimately, the choice of which accounts to close is up to you, but there is one credit card account that you should never close: the oldest account you own.
The long history of this account on your credit report is one of your most valuable assets. Again, if this card has an annual fee, negotiate with the credit card company to have it reduced or eliminated. It’s also wise to use this card a few times a year because credit card companies sometimes close accounts for inactivity.
Know Your Credit Utilization Rate
Even though the intentions are good, many people don’t realize that simply paying their balance in full each month is not always enough to maintain a good credit score. You also need to consider your credit utilization rate, which is the amount of the balances you owe compared to your amount of available credit.
Experts recommend that you keep your credit utilization rate at 30 percent. If you use your cards frequently it might be a good idea to keep all of your accounts open to ensure that your available balance stays at its current level. If you close a card and still spend at the same rate it could have an impact on your credit score.
Keep Tabs on Your Credit Report
Even closed accounts remain on your credit report for 10 years, so it’s wise to view your report as often as possible to ensure that all of your accounts are exactly where they need to be. Mistakes happen and it’s up to you to ensure that your credit history is accurate.
In addition, if you keep cards that you don’t use, you should check in on them from time to time to be certain that your accounts haven’t been compromised in any way.
Maintaining a solid credit history is important and credit cards are a big part of that. Always take care when making decisions about your accounts and try to fully understand how and why those decisions will affect your score. These tips will help you keep your good credit score intact.
Written by Cher Zavala
About the Author: Cher Zavala contributes content on a variety of subjects to a number of high-quality websites.