Is it bad to close a credit card?

The short answer is “probably not.”

The long answer is that how closed credit cards affect your credit history is somewhat complicated. First, your payment history will continue to affect your credit score regardless of whether the card is open or closed (seven years for bad payment history, ten years for good payment history). In your case, though, this is a good thing (especially since payment history controls about ⅓ of your credit score).

Second, closing a credit card reduces the amount of total credit you have available. But it doesn’t change the amount of credit you are using. Therefore, your utilization ratio (which is based on the percentage of available credit you are using) will go up. Utilization ratio is one of the main ways that potential creditors determine your credit risk (and credit risk controls another ⅓ of your credit score), so closing the card will technically lower your score. However, it will not make you any worse off than you were before you opened the card.

Finally, if this were your only credit card, your oldest credit card, or your only form of credit at all, then closing the account could hurt your credit score. Since your credit history for closed accounts goes away after seven or ten years, a closed account will eventually be erased from your credit history. This is bad if you don’t have other longstanding accounts to show that you aren’t a credit risk. Additionally, credit score is in part determined by what sorts of credit you have available. Only having credit cards and having no credit cards are both bad for your credit score. Closing your only credit card would therefore decrease the diversity of your credit portfolio, thus lowering your score. Assuming you have other accounts and other types of accounts, though, neither of these concerns will apply in your case. (These two factors combined control about ¼ of your credit score.)

In short, closing accounts that you haven’t had for very long isn’t a huge risk. While potential creditors will look at the average age of your various accounts, newer accounts don’t help that much anyway. It’s closing old accounts that is bad for your credit score—so don’t let this one linger if you’re just going to close it eventually anyway!

I have a student loan I am still paying off. I think I’ll just cancel it.

Go for it. And oddly enough, good payment history on your student loan can really boost your credit score. So if you have that and one long-term credit card, you might have a much higher score than you’d expect.

Cancel the credit card but find a bank that will give you a debit card. It has all the advantages of a credit card but you use your own money. Such a card will be useful for shopping and you won’t need to carry a lot of cash around with you.

You will reduce your available credit when you close it, so your credit score might dip a little temporarily. What was the limit on the card? If it was just a couple grand it will have very little effect. If it was $15k maybe a little more affect, because the available credit is higher.

I’m going to go against what @Cosmos said and say do not get a debit card to replace the credit card. Debit cards do not affect your credit report at all. Get a regular credit card to replace the one you want to close if you don’t have any other credit cards in your wallet already.

Get a credit card that either has no annual fee or at least the first year the fee is waved and some other sort of gimme like a free hotel night or 25,000 airline miles, or a cash back card, etc.

Keep the card. One of the major factors in your credit score is the amount you owe divided by the amount of available credit. The lower the number in this ratio, the better.

If you reduce the number int he denominator (the tire credit card) and the numerator stays the same, you are actually using a higher percentage of your available credit. That’s not good. You want to have that calculation as low as possible.

Therefore. Keep the account open, put the credit card in a drawer, and forget you have it. Or shred it. In any event, closing the card is NOT good for your credit score,

Really? It’s only $3000. I already have 1 credit card with a low balance and a student loan that I will only pay the minimum on forever out of spite.

What’s your vote: Śi y no?

I say keep it. Just stash it away. You may need it unexpectedly, and it does you no harm to keep but not use it. At least that’s been my experience.

Getting rid of the card isn’t good for @tinyfaery‘s credit score, but getting rid of it isn’t bad either. It just puts her right back to where she was before she got the card. And since this card doesn’t have a high balance and probably comes with very few benefits, she’d be much better off waiting a few months and opening a new account with better benefits and a higher likelihood of getting a limit increase (if she wants to have a second card at all, that is).

Ahhhhh… Both sides are reasonable. In these cases I usually just flip a coin or something.

I would go with @SavoirFaire‘s advice if it were me

If you want to get rid of that card so you don’t have to think about it, just up the limit on your other credit card. Is the other one a regular visa or mc that you can use almost anywhere? Or, is it for a particular store? You should have at least one card that 90% of stores take in case of emergency.

I personally charge everything I can, but I know some people don’t feel good doing that, or overcharge too easily.

Amex

I think I’ll cancel.

Amex is fine. Most places take that. I recommend getting a visa or mc also eventually, but you don’t have to be in a rush about it. Keep your eyes open for a card that gives you a great offer the first year.

I’m into having only a select few credit cards. I feel like if I get too many, I may forget one and then that will negatively affect my score. Also, I feel like with data breaches and ID theft, it’s better to have less of my personal information in banks’ computers, if possible. I have one VISA, one MC and AmEx, and one store card. When stores ask if I want to open up a store card, I say no thank you. When I get credit card offers in the mail, I shred them. I’m tempted to get an Amazon credit card, but I remind myself of my personal philosophy – less is better.

I want an Amazon card too.

Forgetting one does not negatively impact your score. Open credit helps your score. However, I agree that a lot of cards is hard to keep track of and more chance of something going wrong with identity theft or something like that.

@JLeslie: If I forget to pay it, it will be a late payment. That’s what I meant when I said forgetting one will negatively affect my score.

@jca I agree with that.