Is it worse to cancel a credit card or not use it?

The Great Credit Card Conundrum: Cancel or Let it Gather Dust?

Ugh, I’ve been agonizing over this lately. Do I cancel that old credit card I haven’t touched in months, or just let it sit there, pristine and unused in my wallet? It feels like such a dilemma! Part of me wants to declutter my financial life, simplify things, you know? But the other, more anxious part of me is screaming, “DON’T DO IT! Think of your credit score!”

I’m sure many of you can relate. Canceling a credit card feels almost…disloyal. Like throwing away a piece of your financial history. This particular card is my oldest, a relic from my college days. Seeing it there reminds me of how far I’ve come financially. It’s sentimental, okay?!

But the real reason I’m hesitant is the impact on my credit score. I’ve worked hard to build it up, and the thought of tanking it over a seemingly simple act is terrifying. According to Experian, 15% of your credit score is determined by the length of your credit history. Closing my oldest card would shorten that history, effectively chopping down the biggest tree in my credit forest. My average age of accounts would plummet, leaving a noticeable mark on my score.

For example, let’s say my oldest card is 10 years old, and I have two other cards that are 5 and 2 years old respectively. My average age of accounts would be around 5.7 years. If I close that 10-year-old card, my average age drops to a mere 3.5 years! That’s a significant decrease, which could seriously impact my ability to get a loan with a favorable interest rate or even qualify for a new apartment.

Also, closing a card can impact your credit utilization ratio, another crucial factor in your credit score (comprising 30% of it). This ratio is the amount of credit you’re using divided by your total available credit. Let’s say I have a total credit limit of $10,000 across all my cards. If I close a card with a $2,000 limit, my total available credit drops to $8,000. If my outstanding balance remains the same, my credit utilization ratio will increase, potentially harming my score.

So, what’s a credit-conscious person to do? Personally, I’m leaning towards keeping the card open. I’ll probably put a small recurring charge on it, like a streaming subscription, and set up automatic payments. This way, I keep the card active, maintain my credit history, and avoid those pesky inactivity fees. It’s a small price to pay for the peace of mind knowing I’m not sabotaging my own credit score.

I know this might not be the right solution for everyone. If you’re worried about overspending or have an annual fee that outweighs the benefits, canceling might be the better option. But for me, the benefits of keeping that old card alive, even with a zero balance, outweigh the perceived hassle. It’s like having a trusty old friend in my financial corner, silently supporting my credit score. And honestly, that feels pretty good.