I have closed old credit cards even though it is hurting my credit rating. here’s why

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Sometimes the disadvantages of keeping a card open can outweigh the advantages.

Key points

  • Closing old credit cards can lower your credit score.
  • Most often, financial experts recommend keeping old accounts open.
  • I still closed some old credit cards because they had high fees.

Like most financial writers, I often advise keeping old credit cards open even if you no longer use them. There’s a very good reason not to close outdated credit accounts, including the fact that they improve your credit score by showing a payment history over the years and helping you maintain a lower credit.

But, despite the fact that I categorically believe that it’s generally a good idea not to close old credit card accounts, I actually closed several of my own cards not too long ago. It hurt my credit rating, as I expected, but I did it anyway. Here’s why.

Keeping cards open has a cost

The reason I decided to close some old credit cards is that keeping them open was actually costing me money. The cards had annual fees, which meant I paid every year to keep them open just to avoid hurting my credit rating.

While annual fees were once justified by perks, which included access to airline lounges and other travel-related perks, that was no longer the case. Due to COVID-19, I haven’t been able to travel much. And even if the pandemic hadn’t hit, having two young children and an elderly dog ​​has reduced my ability to fly very easily for the foreseeable future.

Since I was paying a lot of money for perks that were of no use to me, and I have other cards that can earn better rewards based on spending than I do now, this had no it just doesn’t make sense to keep the cards open and bear those costs indefinitely.

I could afford to take a little hit to my credit rating

Another big reason I decided this was an ideal option for closing old credit cards is that I don’t really care if my credit rating goes down a bit.

My credit score is currently well above 800, so even if it were to drop a little, I would still have a score that lenders view very favorably. Closing old accounts was not going to relegate me to the inability to borrow or make me a customer that companies would be concerned about doing business with.

I also don’t plan on taking out a major loan anytime soon. We already own our home and we do not take out car loans or other types of loans such as personal loans. And we already have a credit card that we love, so we had no plans to apply for new credit cards in the coming months.

Because I’m not worried that a temporary drop in my credit rating could make a big loan more expensive or prevent me from borrowing the way I want, there was absolutely no justification for continuing to pay the fees for keep unused cards open.

Now, my math was personal to me and others may find that closing old cards isn’t worth it now, even if they have to pay a fee to keep them open a bit longer. The important thing is not just to blindly follow the rule of always keeping them open, but to consider what is best for you.

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