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Deciding whether to close an old credit card can feel like a tough call. After all, credit cards impact your credit score, your spending habits, and sometimes even your sense of financial security.

But if you’re not actively using a particular card, you may wonder if it’s worth keeping around, especially if you think there are better credit cards for you. Here, we’ll look at the pros and cons to help you decide whether to keep that card open or finally say goodbye.

Consider how your credit score will be affected

Closing a card can have a bigger impact on your credit score than you might expect. Factors like credit utilization, payment history, and credit history length influence your credit score. If you close an old card, you could be removing an established line of credit, which can impact the “length of credit history” part of your score.

Credit utilization — basically, the percentage of available credit you’re using — also plays a key role. Closing a card lowers your total available credit, so your utilization ratio might increase.

For instance, if you have a credit limit of $10,000 across two cards and are using $1,000, your utilization rate is a low 10%. But if you close one of those cards and your total credit limit drops to $5,000, you’ll be using 20% of your available credit, which could lower your score. This might be a small difference, but if you’re planning on a big purchase like a home or car soon, every point counts.

Think about the card’s annual fee and your benefits

One reason many people consider closing an old card is to avoid paying an annual fee, especially if they’re no longer using the card’s perks or rewards. If your card comes with an annual fee but you’re not taking advantage of its benefits, it might be a good idea to close that card account.

But before making any decisions, ask yourself if you’ll lose out on any valuable perks by closing it. Some cards offer excellent benefits that can actually offset the annual fee or even provide more value than you’re paying. For example, if your card includes travel credits, bonus points, or complimentary services, you might still get good value from it — even if it’s gathering dust most of the year.

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Evaluate how it impacts your spending habits

Keeping an old credit card open or closing it can also influence your spending habits. For some, having an extra card lying around can lead to occasional “just because” purchases. If that sounds familiar, closing the card might actually be a smart way to minimize impulsive spending.

But if you’ve managed your finances well with multiple cards, keeping the card open could help maintain your financial health by continuing to diversify your credit lines.

For people who primarily use their debit cards or cash, keeping an extra credit card might seem pointless. But if you’re disciplined, keeping the card open could add to your credit mix without adding to your spending.

Are you planning to make big financial moves?

If you’re about to make a large financial move — like buying a house, refinancing a loan, or financing a new car — your credit score will be scrutinized. And because your score can take a hit when you close a card, you might want to hold off until after any big moves are completed.

Lenders like to see a solid, steady credit history, so any sudden changes to your credit profile can raise questions. By keeping the card open for now, you’ll ensure your credit score stays as high as possible during the application process. Once your big financial moves are complete, you can re-evaluate.

Explore the option of downgrading or using the card occasionally

If you’re on the fence about closing your card, one option is to downgrade to a card in the same product line without a fee, if the option is available. This allows you to keep your credit history intact without having to pay an annual fee. Additionally, periodically making small purchases on the card, like a streaming subscription or a small monthly bill, can prevent it from going inactive, helping you maintain a long, positive credit history.

Keeping the card active with small, manageable transactions also demonstrates to the credit bureaus that you’re using the credit responsibly. Just be sure to pay it off each month to avoid interest charges.

The decision to close an old credit card isn’t black and white. For some, closing a card is the right choice to eliminate fees and avoid temptation. For others, keeping an older card open can significantly benefit their credit profile.

Ultimately, consider your current financial goals, any potential upcoming big money moves, and your personal spending habits. A bit of planning can help you decide what best supports your financial well-being.

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