How Long Should I Keep a Credit Card Open?

Credit cards are a common financial tool, and managing their longevity is an important aspect of financial well-being. Understanding the implications of maintaining or closing accounts helps consumers make informed decisions.

Understanding Credit Account Age

The length of time credit accounts have been open plays a role in a consumer’s credit profile. Credit scoring models, such as FICO and VantageScore, consider the age of credit history when calculating a score. This includes the age of the oldest account, the newest account, and the average age of all credit accounts.

The Average Age of Accounts (AAoA) is determined by summing the ages of all open credit accounts and dividing by the total number of accounts. For instance, if an individual has three accounts aged 2, 4, and 6 years, the AAoA would be 4 years. A longer AAoA contributes positively to a credit score, as it demonstrates a history of responsible credit management.

The length of credit history accounts for about 15% of a FICO score and 20-21% of a VantageScore. While payment history and credit utilization have a greater impact, a lengthy credit history signals responsible credit management. Closing an older account can potentially lower the AAoA, especially with VantageScore models, which may exclude some closed accounts. FICO models continue to include closed accounts with positive payment history in credit history calculations for up to 10 years.

Factors for Maintaining an Open Account

Maintaining a credit card account, even if not frequently used, offers several advantages. A high credit limit, especially with a low or zero balance, helps keep your credit utilization ratio low. This ratio compares credit used to total available credit and is a significant factor in credit scoring, with lower ratios viewed favorably, ideally below 30%. A higher credit limit on an existing card can enhance credit scores by improving this ratio without increasing debt.

Accounts without an annual fee are beneficial to keep open, as they do not incur recurring costs while contributing positively to credit history. Such cards help maintain a strong AAoA without financial burden. If a card offers valuable rewards programs, like cashback or travel benefits, that outweigh potential costs, retaining the account provides ongoing value.

An open credit line can serve as an accessible source of funds for unexpected financial needs, offering a safety net during emergencies. This provides flexibility, though an emergency fund is a more financially sound long-term solution. Maintaining different types of credit accounts, including credit cards and loans, contributes to a diversified credit mix considered by credit scoring models.

Factors for Considering Account Closure

While keeping accounts open supports a healthy credit profile, specific situations may warrant closing a credit card account. High annual fees can erode a card’s value, especially if benefits do not justify the recurring cost. If rewards or services are not fully utilized, the annual fee can become a financial drain.

For some, an open credit line might present a temptation to overspend, potentially leading to increased debt. Closing such an account can remove this temptation and support responsible financial habits. This personal finance consideration is a valid reason to close a card, even if it has a positive credit history.

Poor customer service or unfavorable changes to a card’s terms, such as increased interest rates or new fees, can warrant account closure. If an issuer provides inadequate support or modifies terms to be less advantageous, the card may no longer be a suitable financial tool. If a credit card serves no unique purpose, is rarely used, or is redundant due to other cards, it can be considered for closure. While advisable to keep accounts open, an unused card offering no distinct advantage can simplify financial management.

Managing Accounts Without Closing

To preserve the benefits of long-standing credit accounts without active usage or unnecessary costs, several strategies exist. A common approach is to contact the card issuer to inquire about a product change or downgrade to a card with no annual fee. This process allows account history to be retained while eliminating recurring charges.

To prevent an account from being closed due to inactivity, making infrequent small purchases can keep it active. Charging a minor amount, perhaps once every few months or annually, and immediately paying it off signals activity to the issuer. Setting up a small, recurring payment, like a streaming service or utility bill, on the card is another effective method. This ensures regular activity without manual intervention, provided the balance is paid promptly.

Even for inactive cards, it is important to monitor account activity regularly. Reviewing statements for unauthorized transactions or unexpected fees helps protect against fraud and ensures the account remains in good standing. This vigilance helps identify any issues that might arise.