When Should You Close A Credit Card

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Closing a credit card can occasionally be detrimental to your credit score. For example, if you close a card with a high credit limit, your credit utilization will get worse. If you close one of your oldest credit cards, it will only stay on your credit report for 10 years. After that, it will fall off and could negatively affect your score.

It’s very rare that I would advise closing a credit card account, but in some cases it makes sense. Here is a list of reasons I suggest you close a credit card account.

You Need to Move a Credit Line Around
If you have 4+ cards on Chase, signing up for a new one will likely require that you move a credit line around. If this happens, I would suggest closing your least used or newest card. That way moving around the credit line will likely have no effect on your manufactured spending or your credit score.

The Annual Fee Hits and You Cannot Downgrade
Most of the credit cards we MS with have annual fees. Some of them, like the American Express Platinum card, have some pretty daunting fees ($450) at that. If the annual fee is about to hit, your first step should be to make a retention call to the credit card issuer. If the CSR refuses to give you a retention bonus and you cannot justify the fee, it may be time to downgrade the card. For example, if you have a Chase Sapphire Preferred, you can downgrade it to a regular Chase Sapphire to avoid the annual fee.

If for some crazy reason you cannot downgrade your credit card (I have never heard of this happening), then you should close your account. This is a very unlikely scenario, because I have never heard of that happening, but if it did I would suggest closing the account.

Churn-able Cards
Many credit cards can be closed and reopened after a certain amount of time. By doing this, you can get the sign-up bonus multiple times. Citi cards come to mind when I think of churn-able cards. This is because personal Citi cards used to be churnable every 60 days or so. However, as of August 2013, Citi has fixed this glitch. Now, you can only sign-up for Citi cards (and receive the sign-on bonus) anywhere from 12-24 months in between applications. If you are interested in finding out more about churnable cards, read this Flyertalk Forum.

Again, I would avoid closing any credit card unless you absolutely have to. If you do not plan on using the card and it does not have an annual fee, just throw it in your sock drawer. If it does have an annual fee, try downgrading it to a card without one and don’t use it anymore.


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