The conventional advice regarding credit cards suggests that keeping them open for an extended period is beneficial. Individuals who have selected one of the top credit cards are encouraged to retain and use it as long as possible, as this can positively influence their credit score.
While maintaining an open credit card account generally has advantages, potential drawbacks also exist. For those who have held the same credit card for over 15 years or are curious about the implications of doing so, the following information is essential.
It Might Not Be the Best Fit Anymore
Continuing to use the same credit card after achieving a high credit score can be a financial misstep, especially if the card offers only minimal rewards, such as earning one point per dollar spent. With an improved credit score, individuals can qualify for credit cards that provide significantly higher rewards.
Over a span of 15 years, the credit card that was once suitable may no longer meet current needs. While there may be no need to cancel the existing card, situations prompting the search for a new card include:
- A significant increase in credit score.
- Changes in lifestyle.
- Changes in spending habits.
For instance, if travel has become more frequent compared to when the credit card was first obtained, it may be worthwhile to acquire a travel card, especially for those with a high credit score, to maximize savings on vacations.
It Looks Good on Your Credit History
Maintaining a credit card for an extended period positively impacts credit scores. The length of credit history comprises 15% of a FICO® Score, which is the most widely used credit score type by lenders.
Furthermore, payment history accounts for another 35% of the FICO® Score. Consistently paying credit card bills on time over many years can significantly enhance one’s payment history, contributing to a stronger credit score.
Your Card’s Features Could Change
Credit card issuers may refresh their cards or even phase them out. Long-term cardholders could experience changes such as:
- Modifications to the rewards rate.
- Addition or elimination of benefits.
- Increases in annual fees.
- Discontinuation of the card, with transitions to a new card.
Changes in a card may necessitate an evaluation to determine if it remains valuable. Ideally, it will garner additional features, enhancing its worth. However, if the card’s appeal diminishes, continuing its use might not be justifiable.
What to Do with an Old Credit Card You’re Not Using
Options for unused old credit cards include:
- Keeping it open: If the card has no annual fee, it can be retained without adverse effects.
- Downgrading it: Some card issuers allow downgrading to a card with no annual fee.
- Closing it: This option is recommended for cards no longer in use that carry an annual fee and cannot be downgraded.
Contrary to popular belief, closing old credit cards does not necessarily harm credit scores. Closed accounts in good standing remain on credit histories for ten years, continuing to benefit the score. By the time the account is removed from the credit file, a long history with another card will likely have accrued, ensuring the credit score remains unaffected. Thus, concerns about closing a redundant card are unfounded.
