Your 10-year cardholder anniversary isn’t an extra-special milestone. Your card company won’t send you a pair of tin cufflinks or diamond earrings.
However, keeping a credit card open for at least that long can have several benefits — even if you don’t really use the card anymore.
1. It increases your length of credit history
The length of your credit history is the third-biggest factor in your FICO® Score. It includes both the age of your oldest credit account and the average age of all your accounts. The older, the better.
If you close a credit card you’ve had for years, then your average account age — and therefore your FICO® Score — could drop by quite a lot. If you no longer use the card, consider keeping it open anyway, so long as it doesn’t charge a high annual fee. Just make a small purchase once a month or so to make sure the card isn’t closed due to inactivity.
My suggestion: Use the card as your automatic payment option for a streaming service or other recurring bill.
Want a credit card that will give you generous rewards for years to come? Check out our list of the best credit cards to find your next “forever” card.
2. You might get better terms from your card issuer
Credit card issuers love a longtime customer in good standing. If you’ve made on-time payments for 10 years running, then you have some leverage to ask for better terms, like:
- A higher credit limit
- A lower APR
- An annual fee waiver (don’t expect to get this more than once)
You’ll also have better odds of being approved for an upgrade to a better card, like a premium travel rewards card.
3. It helps keep your credit utilization low
Your credit utilization ratio is the percentage of your available credit that you’re using. This is a huge part of your FICO® Score. It’s best to keep your utilization below 30%, and the lower, the better.
If you close a credit card, then your available credit will drop — and so will your credit score.
Here’s an example:
|
Scenario |
Total Credit Limit |
Amount Owed |
Utilization Ratio |
|---|---|---|---|
|
With old card |
$10,000 |
$2,000 |
20% |
|
Without old card |
$5,000 |
$2,000 |
40% |
Data source: Author’s calculations.
When should you close a credit card?
Despite the benefits of keeping a credit card open as long as possible, there are some good reasons to close a card, too:
- High annual fees. Paying hundreds of dollars every year for a card you don’t want isn’t worth it.
- You’re tempted to overspend. If you have a history of charging more than you’re able to pay back every month, then it may be best to drop at least one credit card and rely on a debit card more.
- There won’t be a big impact on your credit score: If you’ve had several cards open for 10 years or more, and/or your credit utilization is very low, then closing one card won’t make a big difference in your FICO® Score.
It works to the advantage of most people to keep credit cards open for 10 years or longer, but make sure to assess your personal credit situation before making a decision about the fate of your card.
