Is it better to keep credit cards open or close them?

Is it Better to Keep Credit Cards Open or Close Them?

Many people wonder whether it is better to keep credit cards open or close them. There are pros and cons to both options, and the best decision depends on your individual circumstances.

Benefits of Keeping Credit Cards Open

• Lengthens your credit history: The average age of your credit accounts is an important factor in your credit score. Keeping older credit cards open can help increase your average age of accounts, which can improve your score.
• Increases your available credit: Your credit utilization ratio, which is the amount of debt you have relative to your total available credit, is another important factor in your credit score. Keeping credit cards open increases your total available credit, which can lower your credit utilization ratio and improve your score.
• Provides convenience and flexibility: Having multiple credit cards can provide you with convenience and flexibility. You can use different cards for different purposes, such as travel, gas, or everyday purchases. This can help you track your spending and earn rewards.

Drawbacks of Keeping Credit Cards Open

• Annual fees: Some credit cards have annual fees, which can add up if you have multiple cards. If you are not using a card regularly, it may not be worth it to pay the annual fee.
• Risk of fraud: Leaving credit cards open can increase your risk of fraud. If a card is lost or stolen, your identity could be compromised.
• Temptation to overspend: Having multiple credit cards can make it easier to overspend. If you are not careful, you could find yourself with a lot of debt.

When to Close a Credit Card

There are a few situations when it may be beneficial to close a credit card:

• You are not using the card: If you have a credit card that you never use, it is probably not worth it to keep it open. Closing the card will remove the temptation to overspend and reduce your risk of fraud.
• You have a high balance: If you have a high balance on a credit card, closing the card can help you avoid further debt. This can also improve your credit score by lowering your credit utilization ratio.
• You are getting rid of debt: If you are trying to get rid of debt, closing credit cards can help you stay motivated. This will remove the temptation to use credit cards and force you to focus on paying down your debt.

**Ultimately, the decision of whether to keep credit cards open or close them is a personal one. There are pros and cons to both options, and the best decision depends on your individual circumstances.