Many consumers think it is best to cancel their old credit cards. After all, experts routinely warn that having too much available rotating credit can adversely affect your magical credit score. If you hope to get a loan for a car or home, you want that credit score to be as high as possible. Even utilities and conveniences such as phone companies often look at credit scores in order to determine if they will let you be one of their customers. But, before you get the scissors out and start chopping up that old credit card and dialing customer service to cancel your card membership, you might want to take a few things under consideration.
If you have had a certain credit card around for a while, it may actually be dramatically helping your credit score. The longer you have a card and the longer that relationship lasts, the better your score will often look. This is because this older card creates a great picture for lending institutions and other businesses wanting to take a look at your spending and repaying habits. If you cancel the card, that history can be lost, which could have a negative impact on your overall score.
Considering the Motive
If you are thinking out canceling some of your credit cards, you should take a look at the reason why you want to get rid of it. Is it the interest rate? If so, many credit card companies will negotiate a lower interest rate, particularly if you threaten to cancel the card. Credit card companies are in fierce competition with one another and they cannot afford to lose you to another card.
Perhaps you simply want to cancel the credit card because you do not like the way it looks. If this is the problem, you might be able to get a different design for your card while still keeping that relationship together. Some credit card companies offer a variety of designs to choose from, making it no problem for you to get a change if that’s what you need.
Maybe you simply want to get rid of the credit card because you don’t use it anymore. If this is the case, go ahead and let your oldest card stay in your drawer collecting dust. After all, it still paints a picture of your spending habits and keeps your credit score intact, and you still have it around in case of emergency.
When It’s Time for a Change
Of course, there are many good reasons to go ahead and get a new credit card. If your old credit card has a high APR and the credit card company is unwilling to give you a break on the interest rate, you certainly don’t want to keep spending on that card – particularly if you cannot pay the balance in full at the end of each billing cycle. So, there is nothing wrong with going ahead and applying for a low interest rate credit card while setting your “vintage” card aside.
You might also be in the fortunate situation where you are paying off your credit card balance at the end of each billing cycle. If your older card does not have a special reward program or cash back incentive, you are practically throwing money away by not taking advantage of these special credit card deals. Therefore, you might want to apply for a new card that does offer these incentives. Nonetheless, hang on to your old card and let it keep your credit score higher.
Knowing When to Cancel
If you are somebody who has applied for a large number of credit cards, and received them, then it might be time for you to consider canceling some of them. It is true that having too many credit cards can reflect negatively on your credit score. Even having a large number of inquiries into your credit history can have a negative impact. Therefore, you should never apply for several different credit cards. If you have several major credit cards, you should sort through them to find the one that you have been with the longest. Canceling the rest of the credit cards that you do not use should not harm your credit score and will more than likely help to bring it up. At the same time, hanging on to your older card helps keep your credit score high.