Don't Neglect Old Credit Cards
As you apply and are approved for newer credit cards with higher credit limits, attractive rewards, and better interest rates, you might forget about the cards you were using years ago. Because these old credit cards still impact your credit history – and sometimes even your monthly finances – it’s important that you pay attention to them, at least a few times a year.
Be careful about letting old cards remain stagnant. If they remain dormant for too long, the credit card issuer might reduce your credit limit or close the credit card completely. Inactive credit cards might also be excluded from your credit score, so you could lose any boost you receive from the great credit utilization on an unused credit card. You can keep the card active by using it periodically. Once every three or four months is good. Charge something inexpensive and pay the balance in full.
Take inventory of your cards periodically. Check your wallet to make sure they’re still there and that they haven’t expired. Missing credit cards should be reported to your credit card issuer immediately to minimize your liability for any unauthorized charges. When you report fraud, you can either cancel the card completely or have the card issuer send you a card with a new number. Depends on whether you want to keep the account open.
Every few months, check the account history for your unused credit cards to confirm that there hasn’t been any fraudulent activity on the card. You should do this with all your cards, but especially the ones that you don’t use that often since fraudulent charges can go undetected for longer.
Don’t be afraid of closing an old credit card. It was previously rumored that closing an old credit card would shorten your credit history and result in a lower credit score. However, we’ve learned that the damage from closing an old credit card is limited to the impact on your credit utilization. If you close the card in good standing, it will continue to be reported based on the credit bureaus policy for listing old accounts, which is at least 10 years for Experian. So your credit age will remain the same.
It makes sense to close an old credit card you’re no longer using, especially if the card has an annual fee. It’s one less account to manage and one less card to keep up with.
If you decide to close the card, give your credit card issuer a call to let them know your intentions. Follow up with a letter, so your request will be in writing. Don’t forget to pay off any outstanding balance, no matter how small it may be. Shred the card to prevent fraudulent charges on the account.
Don’t ignore future billing statements from your creditor, even if the credit card is closed. There may be charges to your account that need to be cleared up. A small $1 finance charge can grow to hundreds of dollars in a matter of months as late fees are added. If you never catch it, the balance could be charged-off and sent to a collection agency. It won’t hurt to call your card issuer in a couple of months to be sure there’s not been activity on your account.