Cards You Should Avoid Closing

Sporting multiple credit cards has become now more of an economic need, than a social status. In the past, having a lot of credit cards meant that you were part of an elite group of people who could maintain multiple lines of credit. Nowadays, it seems that having a larger credit line gives you a more monetary advantage. However, if you do decide that having way too many cards has become a burden, not only to your finances, but also to your well-being, don’t call your lender just yet to cancel a card.

There are credit cards that you should not close; else your credit score and history will be affected. A good example of a card you should keep is your very first credit card – whether it was issued by a bank or a store. The card with the longest credit should be kept. In some cases though, you can close this first card especially if you have another one with almost the same length of history. If your first card was issued ten years ago, and the second one issued the year after; then you can risk losing that 1 year of credit history – particularly if the first card has a higher interest rate or it is no longer being used.

You should also never close a card that has an unpaid balance. Remember that a percentage of your credit score is your total debt; and by closing this account, you may appear to have more debt compared to your total available credit. This is because once you close an account which still has a balance, your credit limit actually falls back to zero – thus this credit card will appear to have been maxed out. When this happens, your credit score will be affected negatively.

If you have but one credit card, even if it’s just a pre-paid credit card, you should never close it. Your credit score considers all types of credit you have available – and keeping a credit card will keep your points up. Also, this may affect your chances of being approved for a credit card, since lenders will think that you have no experience handling one.

Closing a card with a huge credit limit will affect not only your credit score but also your spending power. Choosing to close an account with $10,000 worth of available credit, over a card with a $5,000 credit limit could affect the ratio of your total debt to total credit. Since you are now limited to a lower credit limit, you’re spending options will also be limited.

Just remember that closing a card for no reason at all will affect your credit score, one way or another – so if you can just hang on to all your available cards, keep them. However, if you can’t, make sure to write a letter to your issuer, explaining in detail why you have opted to close the card; and ask them in turn to write a confirmation letter that the account was closed in good condition.

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