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Is your wallet overflowing with credit cards? Maybe you’re considering closing a few accounts you’re not using to free up some space. But do you know the potential ramifications of doing this? Here’s how to know when to close a credit card account. 

Learn How It Might Affect Your Credit

Did you know that closing a credit card account can have an impact on your credit score? While this might not seem like a huge deal right now, your credit score plays a huge role in your ability to secure a loan. You want to keep a solid credit score to let lenders know you’re likely to pay them back. 

Even though it’s not obvious that closing a credit card account would harm your credit, there are actually a couple ways this can come back to you:

  • Credit utilization is one of the biggest factors in determining your credit score. This is the amount of credit you’re using versus your total allotment. If you close a credit account, you’re going to reduce your credit limit, which can then raise your credit utilization ratio. This is something you should really consider if you only have a couple lines of credit, as closing one could potentially send your credit utilization over 30 percent, which is viewed as a risk to lenders. Furthermore, credit utilization accounts for a massive 30 percent of your credit score. Keeping this aspect of your credit in balance will be beneficial for your overall financial health.
  • Length of credit history is another aspect that can be affected by you closing a credit card account. If you close your oldest account, it will shorten the span of your credit history. Longer credit histories typically coincide with a higher score. This counts for about 15 percent of your total credit score. 

As you can see, there are some logical reasons to keep a credit card account open. But not every situation is the same. Let’s look at a couple situations where it might make sense for you to close a credit card account, especially if you don’t anticipate it substantially damaging your credit score. 

Are There Any Charges for Keeping the Card?

One major reason to consider ditching a credit card is if you’re not using it and you have to pay a fee for keeping the account open. There are some premium-level cards with great rewards perks that will charge an annual fee for users. This in turn inspires people to spend more on their card in order to justify their paying for it. 

On the other hand, a card that doesn’t charge an annual fee is probably worth keeping for the reasons outlined in the previous section. For example, if you have a Chevron credit card, but don’t visit their locations that often, just keep the card open and use it on that special occasion. It’s not going to hurt you unless you have some specific reason you really need to close the account. 

Do You Have Other Motivations for Closing the Account?

In some situations, it makes sense to close a credit card account even if it might harm your credit in the near term. Individuals who have problems controlling their spending fall into this category. People who keep racking up more debt on their credit cards each month might want to consider how to address this. If you keep having problems with keeping your spending under control even with concerted effort, getting rid of the ease of the credit card might be your only choice. 

There are a few factors you’ll have to consider to fully decide whether you should close a credit card account or not. While it’s generally best to keep the account open, there are certainly situations that warrant closing it as well.


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