Many people open multiple credit cards to meet their financial needs. Some keep several cards open for business and personal expenses. Others stick to just one card to build their credit.
If you have several credit cards and want to close one, or more, of them, what should you know about closing them out? Are there any best practices for canceling credit cards? What happens to your credit score?
Here’s how many credit cards you can safely cancel at once, according to experts.
How Many Credit Cards Can You Close at Once?
There isn’t a definitive answer to this question. Todd Christensen, education manager at Debt Reduction Services, said the reason why is because credit ratings are based on a lot of personal information. A definitive answer would be speculation at best.
What cardholders can do is carefully decide which account(s) they want to close.
Christensen recommends taking into consideration the total number of credit cards you currently have open. If you decide to close 75% of your credit cards, for example, this will likely hurt your credit rating much more than closing 25% of your credit cards.
Another helpful approach is to review whether you plan to close a maxed-out credit card or a credit card without a balance. “Closing a maxed-out credit card and converting it to an installment payment will likely hurt less than closing a credit card with no balance on it,” said Christensen.
What Happens When a Credit Card Is Closed?
There are a few immediate impacts to consider when closing a credit card. If you decide to cancel a few cards at the same time, Christensen said you will be likely to see your credit rating drop.
Additionally, closing a credit card reduces your amount of available credit. If you carry any balance, Christensen said it will be closer to your total possible limits. As a result, you will have a higher utilization rate, which will result in a lower credit score.
Are There Any Good Reasons for Canceling Multiple Credit Cards?
Christensen shares a few examples of situations where one may consider credit card cancellation:
- You struggle to control your credit card spending.
- Your credit cards have high annual fees. In the event you’re experiencing financial hardship, such as the loss of a job, Christensen said it could be a good idea to close these cards.
- You’re heading into or coming out of a divorce. “You might find it helpful to close as many credit cards that are jointly held as possible, unless you can convert them to an individual account.”
Ultimately, unless you have good financial reasons, such as the ones listed above, Christensen suggests not closing a credit card account — especially one with zero balance.
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