Is It Time To Close A Credit Card?

If you have a credit card that you have not used, then you may be wondering whether it is time for you to close it. Closing a credit card may seem like it is the right thing to do if you are no longer using it. However, it is important to remember that your credit may suffer if you close the credit card.

 

Your credit limit is one of the factors that affects your credit score. If you close your credit card, then you will have less available credit. For example, you have two credit cards. One credit card has a limit of $1,000. The other credit card has a limit of $5,000. If you close the credit card with a limit of $1,000, then your credit limit will be reduced to $4,000.

 

You need to keep your credit utilization rate to less than 30 percent. That is why if you are nearing the 30 percent credit limit, then you will need to keep the credit card open. Closing your credit card will also make your credit history younger. This will lower your credit score.

 

It is important to note that credit cards are sometimes closed due to inactivity. That is why it is a good idea to set up a recurring payment and put it on your credit card. Pay the card off every month.

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