Is it bad to close a credit card right after opening it?

The Myth of Immediate Credit Card Closure Damage

The internet is awash with advice about managing your credit score, and some of it can be confusing, even contradictory. One common piece of credit folklore is the idea that closing a credit card immediately after opening it is significantly worse than keeping it open. This simply isn’t true. While closing a new card isn’t ideal, the immediate impact on your credit score is essentially the same as if you kept the card open.

When you apply for a new credit card, the lender performs a hard inquiry on your credit report. This hard inquiry temporarily dings your credit score a few points. Furthermore, opening a new account lowers your average age of accounts, another factor impacting your credit score. These two factors – the hard inquiry and the lower average account age – are the primary drivers of the initial score dip you experience.

The act of closing the card itself doesn’t cause further immediate damage. The initial hit to your score has already occurred. Whether the card remains open or is closed shortly thereafter, the impact from the inquiry and the new account remains on your report.

This doesn’t mean closing a new card is a consequence-free action. While the immediate score impact is negligible compared to keeping the card open, closing the card does remove its available credit from your overall credit utilization ratio. Credit utilization is the percentage of your available credit that you’re currently using. A lower utilization ratio is generally better for your credit score. Therefore, while closing a new card doesn’t cause additional immediate harm beyond the initial opening impact, it can hurt your score in the long run by potentially increasing your overall credit utilization if you maintain balances on other cards.

So, what’s the best course of action? If you’ve opened a card and then decide it’s not for you, closing it right away won’t cause any extra short-term damage beyond what’s already happened. However, consider the long-term implications for your credit utilization. If possible, it’s often better to keep the card open, even if you don’t use it regularly. Just make a small purchase every few months and pay it off immediately to keep the account active and prevent it from being closed by the issuer for inactivity. This strategy maintains your available credit and helps keep your utilization ratio low, contributing to a healthier credit score in the long term.