Q&A: Should I close high-limit, zero-balance cards I don't use?

When considering closing unused cards, keep your oldest card and scrutinize those with annual fees

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question

Dear Credit Guy,
I have three credit cards that have high credit limits with zero balances. I don’t plan on using them anymore. I was wondering if I should close them or request a credit limit decrease (not sure of the terminology) – Ann

Answer

Dear Ann,
I’m not sure I would recommend that you take either of the actions you suggest because of the negative effect these actions might have on your credit score. And while you may not be all that concerned with your credit score at this time, there are good reasons for avoiding doing anything that would bring it down for any reason.

  • With high credit limits and zero balances, these credit cards are boosting the available credit portion of your credit score. 
  • There is also the length of credit history to consider. It sounds like you have had these accounts for quite some time, and “oldest credit line” is also important to your score. 
  • Credit utilization and length of credit history are not the most important pieces of the credit scoring pie – that would be on-time payments – but they do count and should not be overlooked.

Plenty of available credit is a good thing
There was a time when lenders looked at an excess of available credit as a bad thing. The thinking at that time was that an excess of available credit could all too easily become an excess of debt.

Those times are long past. In today’s credit lending world, plenty of available credit signals to lenders that the consumer can responsibly manage credit.

I will say, however, that if you are concerned that you might be tempted by too much available credit then you might want to close or reduce these limits. Only you can answer that question, but it seems to me that because these accounts have no balances that is not something you are all that worried about.

Managing your cards
With all of this in mind, I have a third option for you to consider. Keep your oldest account open and close the other two.

  • Keeping your oldest card open will preserve the length of credit history in your credit score.
  • If all three cards had no balances, closing two and keeping one shouldn’t affect your credit utilization ratio – the amount you have borrowed compared to your credit limits.
  • If any of the cards carry an annual fee, those would be the ones I would recommend closing. Since you have a zero balance, you are paying an annual fee on a card that you are not using.

I do want you to know that you run the risk of having the lender close the account you keep if you never use it.

  • For that reason, consider using the card for some purchases you have already planned for and can pay in full when the bill arrives.
  • Doing so will keep the account current and active, which will continue to improve your credit score.
  • Paying off the balance in full each month will keep you from ever paying any interest on your purchases.

I said earlier that there are good reasons for keeping your credit score as high as possible. Why is this? In addition to lenders having access to your credit scores, landlords, insurance companies and some employers can look at them, too.

Take care of your credit!

See related: How to cancel a credit card, Don't be hasty in closing unused account with $0 balance

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Updated: 11-24-2017