Posted by Do you know what to know How Long Should I Keep a Credit Card? First, it is very important for you to understand that you can simply be able to keep your credit card indefinitely if you really want to.
As long as you are simply making use of the card regularly and keeping your account in good standing, your issuer probably will not close it for you. If you like your card and simply want to keep using it, then go right ahead.
How Long Should I Keep a Credit Card?
In fact, there is even a good reason to be wary of closing a credit card, even if you are not making use of it. Cancelling a card can even have a negative impact on your credit score because you will be instantly reducing your available credit. If you are then carrying a balance on other cards, your credit utilisation ratio will shoot up. This can then even hurt the 30% per cent of your credit score that is determined by amounts owed.
How Long Is Too Long To Keep A Card?
Now there is no such thing as “too long” to keep a credit card. If you are simply happy with your card and then getting a lot of value out of the rewards, there is no harm for you in sticking with it. Likewise, if you have stopped using a card and it does not charge an annual fee, it is simply preferable to keep the account open.
But just simply remember that there are cards that are always coming to the market all the time. Once a year or so, it is a very good idea to look around at what is out there. You may even find that something new trumps the card you have been loyal to for years. You should also be able to reevaluate what you need from a credit card as your financial and personal life changes. A card that once fits your lifestyle perfectly may even not be ideal five years later.
A Case for Closing a Card from Time to Time
Although you can simply hurt your credit score by closing a credit card, that does not mean there is never a good reason for you to do it.
For instance, if you have a card that you are not making use of and it is then charging you an annual fee, it is not worthwhile to hold onto the card. it is even costing you money, and you are not able to counterbalance the expense by racking up big rewards.
If this card has a high credit limit, then you can simply minimise the impact on your credit score by paying off the balances on your other cards before cancelling them. That way, your credit utilisation ratio will even stay in check, despite the cut to your available credit.
There is also something to be said for you when cancelling cards you don’t use and that have small credit limits (like retail credit cards, for instance). Keeping track of a bunch of cards can then begin to become a challenge over time, especially in an era where we are concerned about the fraud and identity theft. Getting rid of a few low-limit cards should then not affect your credit very much and can even provide some peace of mind.
How Long Should You Keep Credit Card Statements?
For Most Consumers
Most credit card policies will simply give you a period of 60 days to be able to report errors on your statement, which is why that is a good rule of thumb for how long to hang on to your hard copy statement. However, some of the issuers have extended warranty policies to a period of 90 days, and some may even give up to a year. Consult your issuer’s policy for reporting statement errors to find the length of time that simply applies to you.
For Business Owners and Charitable Donors:
If your credit card statements include any business purchases or any charitable donations, you must then keep them longer. This is because you will simply need to document those purchases on your taxes. It is very important to hold on to evidence for tax-related purchases for at least a period of six years in the event your tax returns are audited.
Even if you gain access to digital statements, it is still a good idea to hold on to your physical statements. While your issuer might even have years of your statements archived, they might not be easy to access. And there is also no guarantee that your issuer will hold on to your old digital statements at all.
Closing a Credit Card with a Zero Balance
Now if you feel like closing your credit card and you want to know if it is a bad idea, then you are covered. Closing a credit card isn’t a bad idea, even if it can hurt your credit score. So, for whatever reason, if you feel you don’t need a credit card anymore and you want to close it, then you should simply make or follow the instructions given to you by the credit card platform to close your credit card.
How Do I Cancel My Credit Card?
Now, cancelling a credit card is very easy when you know the steps on how to do it, and if you want to know these guidelines or steps on how to do so, then you should read below:
- Pay Off Any Remaining Balance
Pay off your credit card balance in full prior to cancelling your card. While you might be able to close an account with a balance, some issuers allow account closures for new charges while you simply pay off a balance. It is recommended that you pay it off in full. This simply makes sure that you don’t forget about any balances or incur fees.
You can also consider completing a balance transfer before closing the card. Any lingering debt can be moved to a balance transfer credit card by simply offering up to 21 months of no interest.
After you pay off your balance, then ensure you also update any subscriptions and also automatic payments to a new card. These payments will not be approved once your account is closed, and you might risk service interruption or fees from the billing company.
If you do not have a rewards card, skip stepping three.
- Redeem Any Rewards
If you then cancel a rewards credit card, any unused cash back, points, or miles might be forfeited upon account closure. It is also a good idea to redeem or transfer those rewards before closing your account so you do not lose out on the rewards you earned.
Review the fine print of your card’s rewards programme so that you can know the redemption terms. For instance, travel credit cards might then allow you to transfer points to hotel or airline loyalty programmes or to family or friends. Cash-back credit cards usually allow you to deposit cash back into a linked checking account, but be aware that there may be a $25 minimum redemption amount.
- Call your bank.
After you have paid off your balance and redeemed any rewards, it is then time to start the cancellation process. Call the number on the back of your credit card to simply speak to a representative.
Before you ask to close your account, you should double-check that there is no balance. If you were carrying a balance from month to month, then there may be residual interest, which then accrues in the time between when your bill was sent and when your payment was made.
Once you have confirmed the balance is zero, tell the representative you would like to permanently close your account. The representative might then try to discourage you or present a retention offer, but at the end of the day, it is your decision, so you should reconfirm that you want to cancel your account. And tell the representative that you simply want it noted that the account is being closed at your request, which ensures it will not look like your account was closed by default.
Make sure you simply get the key information: the date and time you have requested the cancellation; the name of the person you are also speaking to; and a mailing address where you can then send a written cancellation letter.
- Send a Cancellation Letter
It may seem old-school to simply mail a cancellation letter after you just called, but it is also a key step that should not be overlooked. The odds are that the representative you have spoken with will close your account simply, but there is always the chance of a mistake or computer glitch.
Follow up with a brief letter to your card issuer stating your desire to simply close the credit card. Include that you want the account to be “closed at the consumer’s request” and also include your name, address, phone number, account number, and even the details of your call with the bank’s representative.
As an added layer of protection, send the letter via certified mail so that you can prove it was delivered. You can even ask for written confirmation that your account has been closed with a $0 balance.
Check your credit report.
Keep in mind that it may take a month or more for your credit report to reflect a cancelled credit card. Once you have seen the closed account on your credit report, then you should simply verify that the reason for closure is “closed at consumer’s request” or something similar. If you then see a different reason, such as “closed by the issuer,” you should then contact your bank to resolve the issue since it could potentially harm your credit score.
You have several ways that you can use to view your credit report for free: once a year from each of the three credit bureaus (TransUnion, Experian, and Equifax) at AnnualCreditReport.com, updated every 30 days with Experian, or with CreditWise from Capital One.
- Discard your old card.
After your account has been officially closed, you can then destroy your card. The simplest way to do so is to put your card in a shredder. You can even cut it into tiny pieces.
If your card is made out of metal instead of plastic, such as the American Express® Gold Card, these options will not work. You will simply need to contact your bank and request a prepaid envelope that you can use to mail your old card back. Once received, your bank will safely dispose of it.
FAQs
How Long Should a Credit Card Last?
It should simply last for at least three to five years. How Credit Card Expiration Dates Are CalculatedCredit cards do expire every three to five years, depending on the issuer of the card. Banks usually set expiration dates based on a number of factors, including physical wear-and-tear on the card, security, and even encouraging consumers to then reevaluate their credit card plans for upgrades.
Is There Any Reason to Keep Old Credit Cards?
Tax-related expenses are simply (mostly) a very important reason for you to keep credit card statements for longer than the period of 60 days. This may even be especially helpful for those who are using business credit cards. The IRS retains the right to audit anyone’s financial history for up to a period of six years.
Is It Better To Cancel Credit Cards Or Leave Them Open?
In general, it is best for you to simply keep unused credit cards open so that you can even benefit from longer average credit history and have a larger amount of available credit. Credit scoring models will even reward you for having long-standing credit accounts and also for using only a small portion of your credit limit.
How Many Credit Cards Are Too Many?
How many credit accounts are too many or too few? Well, the credit scoring formulas do not punish you for having too many credit accounts, but you can have too few. Credit bureaus simply suggest that five or more accounts, which can be a mix of cards and loans, are even a reasonable number to build toward over time.