Canceling Your Credit Card: 3 Questions To Ask Yourself
Thinking about canceling one of your credit cards? Consider these questions to save money, time, and your credit score.
Do you have a credit card that sits in your wallet and never gets used? Some people may be tempted to cancel it, while others may hang on to it as a backup card or just in case.
Use these questions to determine the pros and cons of canceling unused credit cards you might have.
Questions To Ask
Is It Your Oldest Card?
Use caution when considering canceling your oldest credit card. Length of credit is part of how your credit score is calculated and the credit cards you first opened often serve as an important marker for credit history. If cancelled, your history may appear shorter and negatively affect your score.
Consider downgrading to a card that will better suit you to avoid hurting your credit score.
Is It Costing You Money?
Some credit cards have fees that make sense if you’re using it because the rewards and benefits will offset the cost. However, if the credit card company is still charging you and you’re not using the card at all, you’re only losing money.
If you aren’t benefitting from it, save your money and cancel the card even if it impacts your credit score.
You can also call and talk to the credit card company to see if they will waive your fees or downgrade your card to something without fees.
Do You Have Multiple Cards You Want To Cancel At Once?
The easy answer is it’s not a good idea to cancel all your unused credit cards at once. This will look suspicious to creditors and increase the negative effects of canceling just one card.
Chose what cards you definitely want to cancel and spread it out over a couple of months or even a year to minimize the impact on your credit score.
Think about what will work best for you and your budget before canceling a card. It may be worth it to take a slight ding on your score rather than keep spending money or maybe it makes sense to hold on to it. Whatever you decide, make sure to pull your credit report yearly to monitor your accounts and stay on track.
Credit is factored into many decisions, including loan approvals, housing applications, insurance rates, and employment opportunities. To obtain the most favorable outcomes, it’s important to understand the basics of credit scores and credit reports.