Even if you’ve paid off your credit card, it may be a bad move to cancel it.
Have you canceled a credit card recently? If so, you’re not alone.
About 61% of people in a new Bankrate survey say they’ve done away with a credit card, and more than half of those half canceled more than one card.
But many people are not aware of the negative implications of getting rid of a credit card can actually hurt your credit score.
That’s because lines of credit are factored in the scoring models used to determine your creditworthiness. Bankrate says the algorithms used for scoring look favorably on long-standing accounts and more available credit.
Instead of canceling a card that you’ve had for awhile, consider keeping it open and making sure you pay off the balance every month.
But let’s say that card carries a high annual fee, in that case, reach out the card company to see what your options are.
You may be able to downgrade to a card with no fee that maintains your account history and shouldn’t impact your credit score.
But there is a good reason to cancel a card outright – if you’re struggling with financial discipline and have trouble not spending, getting rid of the card altogether makes sense.