How do I get rid of my dormant AmEx without hurting my score?
Cathleen McCarthy is a journalist whose articles on travel, commerce and consumer topics have appeared in dozens of publications. She writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com
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Dear Cashing In,
had both the American Express Traditional Green card and Blue card since 2002. Back
when I signed up for the cards, the Blue card by itself was not eligible for
enrollment in American Express's Membership Rewards program. I had to sign up
for the Green card ($55 annually) and enroll that card in the rewards program
($40 annually) so I could collect points on both cards. I chose to carry the
Blue card and put the Green card away where it sat year after year, untouched.
recently discovered I can now carry AmEx Blue and
enroll in the Membership Rewards program without paying annual fees. So I canceled
the Green card's enrollment in the program. I'm
considering canceling the Green card entirely, but read in your
article that credit utilization ratio plays a big part in credit scores and that
one way to offset cancellation of a card is to increase the credit limit of
another. However, my Green card has no pre-set spending limit, so I have no
idea how high to raise one of my other credit card limits to offset canceling. Should
I continue to pay the $55 annual fee on a card that is of no use, or close the
credit card that has had a zero balance on it for 11 years? -- Eric
get rid of that Green card, assuming you have an active and longstanding
history with the rest of your credit. You say you originally got the Green card
to earn points on both of your American Express cards, but
you only ended up earning points on one of them. Now you're spending $55 per
year to hold on to a dormant credit card.
you took on the Green card 11 years ago, you've paid $605 in annual fees on a
card you've rarely used, and an additional $440 for the privilege of enrolling
in Membership Rewards. Given your Blue card earns a flat 1 point per $1 spent, that's a big
investment for mediocre rewards. It's great that you got rid of that $40 enrollment
decide whether or not to get rid of the card completely, it helps to look at
the components of a credit score. Credit history makes up 15 percent of a FICO
score. The Green card is neither your oldest nor your only card. Even if it
were, account activity usually remains on your report for 10 years after you cancel
a credit card or close an account. So you won't harm your credit history
significantly by canceling the green card.
A more important
factor in the scoring -- accounting for 30 percent of your score -- is your
credit utilization ratio. That's the amount of available credit you have compared
to how much you owe. When you close a card, your available credit falls, which
can lower your score, at least temporarily. You may be able to offset that hit
by increasing credit limits on other cards, as you suggested. Be aware that
such a request is considered a "hard pull" on your credit record,
which in itself causes a minor ding to your credit score. But if you keep your
credit utilization ratio below 25 percent and pay your bills on time every
month, you should be able to recover quickly.
need to calculate the exact amount required to offset a cancellation in this
case because you won't have much choice in the matter. Your card issuers
probably have a formula for how much they will increase your credit limit at
sounds like you're not only cutting unnecessary expenses with this adjustment,
but possibly freeing up some money to put toward more lucrative credit card
rewards. Weighing this decision in the context of your overall credit is a
See related: If my oldest card's rewards aren't paying off, should I cancel?,
How card companies report credit utilization to bureaus, Higher limit or second card will impact your credit score
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Published: July 16, 2013