Have you ever found yourself in a committed, long-term relationship with a credit card? While I’ve recently closed my oldest active credit card, I am nurturing another account that has lasted almost as long, and my intention is to keep it going strong.
The overall impact of maintaining a credit card account for a decade or more is largely positive, but within that timeframe, a lot can change – both for you and the credit card itself. Here’s a comprehensive look at the factors you should consider if you want a lasting and rewarding relationship with your credit card.
Fostering Credit Score Enhancement
To put it simply, keeping an old account open and in good standing is beneficial for your credit score. Your credit history’s length matters significantly – it makes up 15% of your FICO® Score. When you apply for new credit, lenders review your credit report, and having a longer credit history is preferred. After all, if someone is extending your credit, whether it’s a credit card, personal loan, or even a major commitment like a mortgage, they want to be confident that you’ll fulfill your repayment obligation. If you’ve maintained a credit card account for a long time and consistently made your payments on time, it reflects positively on your reliability as a borrower.
As a result, it’s worth carefully considering before closing an old credit card. If it’s not costing you anything, such as an annual fee, why not keep it open? You may need to use it occasionally to keep the account active (and to prevent the issuer from lowering your credit limit), but that doesn’t have to be burdensome. You could consider putting a regular monthly expense (like a streaming service subscription) on the card and setting up autopay. This way, you can effortlessly maintain the account’s activity and ensure timely payments.
Adapting to Changing Needs
Over the course of a decade, your life can change substantially, meaning the credit card that was once a perfect fit may no longer meet your needs. For example, if your credit score has significantly improved since you obtained the old card, you might now qualify for a credit card with better perks and a higher credit limit. Perhaps you were financially constrained before, but now you’re in a position to travel more frequently, making a travel credit card with points for flights and hotel stays more appealing.
You can certainly apply for a new card with enhanced features while retaining your old card. According to research by The Ascent, half of Americans have at least two credit cards. Even if you’re not using it for everyday spending anymore due to changed circumstances, the boost to your credit score makes holding onto it worthwhile.
Potential Card Changes by Issuers
But what if it’s not you who changes, but the credit card itself? Credit card issuers regularly introduce new products and retire older ones. So, if you keep a credit card for a long time, you might receive a notice from the issuer that your old card is being phased out, and your account is being transitioned to a new card.
I’ve personally experienced this with both the credit card I closed and the one that remains open, and it hasn’t had a significant impact on me. However, it’s crucial to monitor all your credit card accounts so you’re aware of any changes. You wouldn’t want to miss a new card sent to you – safeguard against potential fraud by ensuring your credit card isn’t intercepted from your mailbox.
When It Might Be Best to Close an Old Card
I’ve likely convinced you that maintaining an old credit card is beneficial, but there’s one scenario in which closing your loyal old card might be the right move. I decided to close my oldest credit card earlier this year because it carried an annual fee, and I wasn’t using the card. While I do have other cards with annual fees, their benefits outweigh the costs for me.
If you possess an old credit card with an annual fee that doesn’t provide any meaningful advantages, it’s worth considering closure. However, I suggest waiting until your credit score is solid and you have sufficient credit limits across your other accounts to prevent negatively impacting your credit utilization ratio in the process.
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Techy is a seasoned writer and expert in the fields of technology and finance. With a passion for demystifying complex concepts, Techy has a knack for breaking down intricate topics into easily digestible content for readers.