Thinking about closing your oldest credit card? Maybe it’s been sitting unused for years, or you’re trying to simplify your finances. While it might seem harmless, this decision can have a bigger effect on your credit score than you think. Before you cut up that card, it’s worth understanding how it works in your favour, and when it might be better to close it.
How Closing a Credit Card Can Affect Your Credit Score
The biggest impact of closing a credit card comes from your credit utilisation rate, that’s the percentage of your available credit you’re actually using. Lenders like to see this under 30%, and the lower, the better. When you close a card, your available credit limit decreases, which can make your utilisation rate jump even if your spending stays the same. Closing a credit card, especially your oldest one, can impact your credit in two main ways:
- Your Credit Utilisation Rate May Increase
Your credit utilisation rate is the percentage of available credit you’re currently using. Lenders prefer this number to stay under 30%, and ideally much lower.
Example:
- Before closing
Card A: R90,000 limit, R22,500 balance
Card B: R60,000 limit, R22,500 balance
Total limit: R150,000
Total balance: R45,000
Utilisation = 30% - After closing Card A
Card B: R60,000 limit, R45,000 balance
Utilisation = 75%
That spike tells lenders you’re using a lot more of your available credit, which can cause your score to dip.
- It Can Lower Your Average Account Age
The length of your credit history makes up around 15% of your credit score. Closing your oldest card could lower your average account age.
The good news? If the account is in good standing, it stays on your credit report for 10 years, so its positive history still benefits you during that time.
When to Keep Your Old Credit Card
If you’re applying for a mortgage, car loan, or any big credit soon, keeping the account open can help maintain your score. Cards with no annual fee are worth keeping too, since they cost you nothing and boost your available credit. If you’re worried about forgetting to use it, set up a small recurring payment, like your Netflix subscription, and pay it off automatically. That way, the account stays active without adding extra debt.
When Closing a Card Might Be the Better Choice
Sometimes closing a credit card is the smarter move:
- High annual fee with no real benefits.
- High interest rate and temptation to overspend.
- The card is new, so closing it won’t harm your credit history much.
What to Do Before Closing a Credit Card
Before you cancel, make sure the account is in good standing. Pay off the full balance and move any automatic payments to another card to avoid missed bills. It’s also worth calling your bank first, they might lower the interest rate or waive the annual fee to keep you as a customer. Once you’ve closed the account, destroy the card by cutting it up or, if it’s metal, return it to the issuer for secure disposal.