Should I Cancel My Old Credit Card?

It used to be in your wallet, but now it’s in a drawer. When you got it, it seemed like a good enough card. But now, you’ve found another. Maybe the new one is giving you more money back when you buy groceries, or maybe the interest rate is lower. For whatever reason, the old card isn’t seeing much action these days, and keeping it around seems like more trouble than it’s worth.

Do you just cancel it? The answer is the ever-frustrating, “It depends.”

First, here’s who probably shouldn’t cancel the old card: people who are fairly new to credit. Your credit history is short, and if you are looking to improve your score, you’ll want to establish credit references that will, over time, help you build a track record of on-time payments.

Still, there are circumstances when it’s fine to cancel, or to ask your issuer if you qualify for a different card. If you are paying an annual fee and do not think it’s worth it, for example, or if you have a secured card and now qualify for a standard card, it may be reasonable to get rid of the card or to switch to a different card from the same issuer.

It’s also important to keep an eye on how much of your available credit you’re using. This new card may be helping your score if it reduces the amount of debt you have relative to your available credit (and we’re assuming you plan to keep your spending levels about the same). Less credit usage is better, and using less than 10% of your available credit is best. If canceling that old credit card would move your debt usage higher than that, think twice. When you’re comparing cards, be sure to look at both terms and credit limits.

Another reason you may want to keep your old, unloved card is because the average age of your credit is a factor in your credit score. Other factors, such as on-time payments, count more, but when you are establishing credit, you want every point you can get because a higher score can get you lower interest rates. (By the way, there is no need to carry your old, unloved card. You could do something as simple as putting a small, recurring bill on the card and setting up automatic payment to be sure there is enough activity to keep the issuer from canceling it.)

When Is Canceling OK — or Even Smart?

There are some people who can cancel an old card without worry. They’re the ones who may not even recall the last time they used a particular card. Their credit is well established, and their credit scores are high with low utilization. They may wish they didn’t need to check quite so many accounts — and identity theft experts recommend that you check your accounts regularly. If you never use the card, it’s easy to forget about an account, and if it’s used fraudulently, clearing up the mess could turn out to be a hassle.

If your credit utilization is low, it’s probably OK to go ahead and let go of a card that once was a good fit but is no longer. Even closed, it should remain on your credit history — for up to 10 years. Canceling a credit card does require taking a good look at your overall credit picture and gauging the potential effect. It’s OK to switch cards — and it’s understandable that when you apply to get a big bonus you may not want to keep every card you’ve ever been approved for. While you should think twice about canceling a card, sometimes there’s no harm in doing it.

If you want to understand how your credit cards are affecting your credit, you can get your free credit report summary from Credit.com, where you’ll see a personalized overview of what’s influencing your scores.