Should You Close a Paid Credit Card?

Close a paid credit card with caution

A close-up of three credit cards

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Paying off a credit card is a great accomplishment, especially if you worked long and hard to do it. What now? Do you leave the card open or should you close it?

You could keep the credit card if you want to use it again in the future, but there are a few good reasons for closing a card you've paid off.

You Want to Downsize Your Credit Cards

You may feel that you have too many credit cards and want to minimize the number of accounts you have to keep up with. Even a credit card with a zero balance has to be monitored regularly to spot any unauthorized charges. Closing a paid credit card could make it easier to manage your finances.

You Have Better Credit Cards

The credit card you had when you first started out with credit, may not be as attractive as other credit cards you've opened over the years. It may have a low credit limit or high-interest rate while your other credit cards have better limits, low rates, and better rewards programs. Getting rid of a credit card that no longer benefits you is a good idea.

Keeping your oldest credit card open is good for your credit score because it demonstrates that you have years of experience with credit.

You Don’t Want to Get Into Credit Card Debt Again

After you've worked hard to pay your cards off, the last thing you want is to max them out again and put yourself back into debt. If you think having an open credit card will tempt you into racking up more than you can afford to pay, closing the credit card is better than getting back into debt.

What Closing the Card Won’t Do

While there are some advantages to closing a credit card you've paid off, it's important to know what closing a credit card won't do for you. For example, many people think closing a credit card will improve their credit score. Unfortunately, it's more likely that closing a credit card—even a paid one—will hurt your credit score rather than help it.

Closing the credit card also won't remove it from your credit report. The account will remain on your credit report until the credit reporting time limit has expired. That's seven years if the account was closed with a negative standing, like a charge-off. An account closed in good standing will stay on your credit report based on the credit bureau's timing for reporting closed accounts.

Should You Leave the Account Open?

Leaving a paid account open can benefit your credit score in certain circumstances. Consider leaving the account open if it's the only credit card that has available credit. Having this card is helping your overall credit utilization, which makes up 30% of your credit score.

You should also keep the account if it's your only credit card. Your credit score benefits from having a mix of accounts on your credit report. That means you'll have a better credit score if you have both credit cards and loans as part of your active credit history.

Some credit card issuers close credit cards that go unused for several months. To keep your account open, be sure to use it periodically. Make a small purchase on the card every three or four months and pay off the balance right away to keep it active and open.

Otherwise, if you have a pretty high credit score and other credit cards that have been open, especially for longer, closing your paid credit card likely won't hurt your credit score much if any.

If you're planning to apply for a mortgage loan soon, don't close (or open) any credit cards since it's impossible to predict with 100% accuracy how that action might affect your credit score.

Article Sources

  1. myFICO. "Will Closing a Credit Card Help My Credit Score?" Accessed Nov. 30, 2019.

  2. Legal Information Institute. “15 U.S. Code § 1681c. Requirements Relating to Information Contained in Consumer Reports.” Accessed Nov. 30, 2019.

  3. Experian. “When Are Closed Accounts Deleted?” Accessed Nov. 30, 2019.

  4. Experian. “What is a Credit Utilization Rate?” Accessed Nov. 30, 2019.

  5. myFICO. "Credit Mix." Accessed Nov. 30, 2019.