Almost every credit cardholder comes to the point when he or she needs to close existing credit cards. There might be different reasons to do that.

Some people need to close their credit card accounts because they want to apply for a better credit card offer but understand that having too many credit cards will hurt their credit score. Some feel like having many cards makes them spend more and close their cards in order to prevent overspending. And some just want to carry less plastic in their wallets.

It is a well-known fact that closing a credit card might affect your credit history. On the other hand, having too many credit cards is not good for your credit report either. That means you can not apply for new favorable credit card offers. A credit card user feels trapped.

However, closing a credit card account is not necessary a bad move. There are some not widely known strategies a credit card owner should use when closing a credit card.

Most credit card owners hesitate to close their credit card accounts because they have simply heard that it might hurt their credit history but they do not understand how exactly it might happen.

Those who consider closing a credit card account need to understand how it will affect their available credit and the average age of their credit history.

Available credit is the amount you can borrow on all you credit cards. You can calculate it easily buy subtracting the sum you already owe from your credit limit. So, if you close a credit card your credit limit decreases but the amount of you debt stays the same. The same thing happens when credit bureaus calculate your credit utilization - the ratio of the credit limit you have and the amount of balance. With each successful application for a new credit card offer your available credit and credit utilization increase your credit score.

Closing credit card accounts also affects the average age of your credit history. This is especially so if you close a credit card you have been using for years.

So, what are the approaches you can take if you need to close a credit card account?

- Avoid closing your oldest cards. If the reason for closing accounts is that you have too many credit cards to apply for a new enticing credit card offer just close the one you have most recently opened.

- Close credit cards with the smallest credit limit. This will not significantly affect your available credit.

- Combine credit limits. This strategy works especially well if you have several credit cards issued by the same bank. Of course, sometimes your credit card company might not allow you to combine, for example, a business credit card into a consumer card but most of the time you will be able to solve the problem by negotiating with the bank.

- Ask for a credit limit increase. You will have fewer cards but your credit utilization will stay the same.

If you follow these simple rules getting rid of the plastic you do not need will not lower you credit score. And with good credit rating you will be eligible to apply for the best credit card offers!

Share Opinion: