Should you keep your credit card or cancel it? This question comes up often, especially when the annual fee is due. At that time, cardholders will often want to re-evaluate their use of a credit card, and close an account that they don’t need.
Here are four times it may make sense for you to close a credit card.
1. The Annual Fee Just Isn’t Worth It
There are many credit cards that charge an annual fee, and the additional rewards and benefits offered can often justify this cost. But if you look at the actual value that a particular credit card has offered you over the last year, then sometimes you are forced to conclude that the fee isn’t worth it. For example, if an expensive credit card comes with an airport business lounge membership that you never use, than it is likely that you could receive most of the other benefits of that card from another card with a lower annual fee.
2. You’re Unhappy With the Issuer
The credit card industry is so competitive, that cardholders don’t need to stay loyal to company that they are not satisfied with. For example, if you consistently receive poor customer service from your credit card issuer, then you might wish to cancel the card and give another company a chance to earn your business. Likewise, if the credit card is co-branded with an airline, hotel or retailer that is making it difficult for your to redeem your rewards points or miles, than it might be time to reconsider your relationship with that company, and its credit card.
3. The Rates & Fees Are No Longer Competitive
Because the credit card industry extremely competitive, card issuers are constantly offer new products with better terms. In addition, cardholders themselves who have improved their credit history since they opened their account may now qualify for better cards than they currently hold. So in these cases, it might be better to close an inferior card and replace it with a more competitive product. (If you are not sure where you stand, you can get a free credit report snapshot, updated every 30 days, from Credit.com.)
4. You Have More Credit Cards Than You Can Manage
If you have many different credit card accounts open, and you find yourself unable to keep up with all of them, then it might be time to close some. Signs that you might have too many credit cards include the inability to keep track of all your cards, or statements, as well as missing payments. Just make sure not to close too many accounts, since eliminating credit lines will reduce your debt-to-credit ratio for a given amount of debt, which can hurt your credit score.
Alternatives to Closing a Credit Card
Even though you might have a good reason to close a credit card account, there are some worthwhile alternatives to consider. For example, if the card has an annual fee that you aren’t able to justify, the credit card issuer may be willing to waive the fee, or offer points or miles of equivalent value, in order to keep you from closing the account. In fact, it’s rare that a card issuer will allow a customer to close his or her account before presenting them with one of these so-called retention offers.
Another option that cardholders are often given is to transfer their account to a different credit card from the same issuer. For example, a customer who complains of high interest rates might be offered a card with a low interest rate instead of a rewards card. In this way, the card issuer retains their customer, and the cardholder can open a new account without filling out a new application.
Finally, those who have more credit cards than they can manage might wish to simply stop carrying a few of their credit cards and put them in a secure place. This way, cardholders can retain their existing lines of credit and build credit history, without closing their accounts and raising their debt-to-credit ratio. (If you choose this, it is wise to put a small charge on cards from time, particularly your oldest cards, so they do not get closed because of inactivity.)
Having a credit card is not necessarily a permanent relationship, and when thinking about closing an account, cardholders need to make the best decisions for their individual needs.
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This article originally appeared on Credit.com.