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Million Mile Secrets reader Micah emails:
What card, if any, in your arsenal have you kept open and maintained the longest? Or do you always close them out after completing the minimum spending and receiving the sign-up bonus?Keep up the great blog!
Which Card Have I Kept the Longest?
I still have an old Capital One credit card that I signed-up for in college. That was before I knew better! It sure bought me a lot of pizza in college.
But I still have this card sitting in my drawer, after all these years!
Why Keep Your Oldest Credit Card?
It’s good for your credit score.
According to FICO, 15% of your credit score is based upon your length of credit history. This is especially important for folks, like me, who apply for new credit cards every 3 to 4 months.
A credit card usually stays on your credit report for 10 years after you cancel the account, unless there is a late payment or no payment.
The Length of Credit History, or the average age of your credit accounts, will almost always decrease when you start applying (NOT when you cancel!) for a lot of new credit cards for the 1st time. That’s because you likely have only a few old credit card accounts and applying for new credit cards reduces the average age of ALL your credit cards.
Closing a credit card account does NOT impact your length of credit history immediately, because it remains on your report for 10 years after you close it.
Your credit history will drop again when a card falls off your credit report after 10 years. You can reduce the impact of this by applying for new cards within the 10 year period So applying for new cards can help and hinder your length of credit history.
Keeping old cards is the best step you can take towards maintaining a longer credit history. My old Capital One card doesn’t charge an annual fee. So it doesn’t cost me anything to hang onto it. This is one reason why everyone should have a no annual fee card.
I use the Capital One card for a small purchase once every 6 months so the bank doesn’t close it because of inactivity.
The Chase Freedom card is my favorite no annual fee card. You never have to cancel it and with the 5X points rotating category bonus you can still get a lot of points. So it doesn’t have to sit in your drawer like my old Capital One card.
Don’t Cancel a Card Right After You Earn the Sign-up Bonus!
You should never cancel your card right after you complete the minimum spending to earn the sign-up bonus. Banks frown upon this practice and it could get you blacklisted (if you do this continously), which means no more Big Travel with Small Money for you!
Also, if the annual fee is waived, there’s no reason to cancel the card immediately.
I like to keep a card ~8 to ~10 months and then decide if the card is worth the annual fee. This helps establish a good relationship with the banks.
I evaluate whether paying the annual fee is worth the benefit of keeping the card. Many cards offer perks like free checked bags, free hotel nights etc. for keeping the card.
There are lots of Hyatt hotels that cost more than $75 per night. So the benefits of this card are worth more than the cost of the annual fee. And it’s worth paying the annual fee if you plan on using the free night each year.
If you have a card that isn’t worth the annual fee, sometimes the bank will offer you incentives to keep the card when you call to cancel. This includes statement credits and miles, which could help make up for the annual fee.
I still have a Capital One card that I signed-up for in college. This card doesn’t charge an annual fee, so I hang onto it because canceling your oldest cards can hurt your credit score.
Never cancel a card immediately after earning the sign-up bonus! The banks do NOT like this and they could prevent you from signing-up for new cards in the future.
I suggest keeping a card until ~2 to ~3 months before the annual fee is due, and then decide whether the card is worth the annual fee.
Thanks for your question Micah!
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