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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.
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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.
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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% |
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.
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