Should You Cancel An Unused Credit Card?

If you own a credit card you no longer use, you may consider canceling that card.

The reasons vary, but your issuer might have:

• Raised the annual percentage rate. Rather than canceling, try not to carry a balance. If you do, pay off that card as soon as you can, or consider a balance transfer offer and shifting that debt to another card.
• Changed the rewards program or raised the annual fee. “I’d argue that an annual fee, which is usually less than a bar tab, is a small price to pay for immediate access to thousands of dollars of buying power,” says John Ulzheimer, a nationally recognized credit expert who once worked for FICO and Equifax.
• Threatened to cancel a card you no longer use. Issuers may target your inactive account, so don’t give them a chance. Make small charges to the card every so often and pay off that balance immediately.

If you’re intent on closing your card, consider this: You might do yourself more harm than good. Before you make a decision, take these three steps. It may change your mind – or at least ensure your decision is a well-informed one.

Review your credit history

Look at how long you’ve held each of your cards. You can do this by searching for open accounts on your credit report. If the card you want to close is one you’ve held for years, you may want to reconsider.

Why? When computing your credit score, the three major credit reporting agencies take into account the length of time you’ve had a credit file open.

If your credit score is excellent, closing one card may not have a big effect on your standing. But someone who has less-than-stellar credit might not benefit from canceling a long-held card, as this could reduce the average age of your accounts, which in turn, can negatively affect your score.