Low credit limit is not a good reason to close credit cards

[bs6054]

I think the case that OP was focussing on was card with no AF and no balance, but low CL, should it be closed?

This sort of question seems to always split the group, roughly falling into:

1) It certainly does no harm, and keeping it open will continue to help AAoA (rather than starting the X year clock after closure).  It also adds to overall CL, although very little, by hypothesis.

2) Too much work, checking for charges, newly instated AFs etc, and if you don't charge something from time to time (which costs rewards as you could charge this to better cards) it might get closed anyway.  

3) Some concern a set of low CL might look bad to future potential lenders.

I'm firmly in camp 2!   I find 1) unconvincing in the long term.  Most of us hope that credit will improve over time.  Closing them doesn't impact AAoA for at least several years, by which time we may have a much better credit picture that negates a decrease in AAoA, and the util gain is also swamped by new better cards/CL.

[09Lexie]

I agree. No AF, no balance (a charge here and there to keep it open) is not difficult at all. If you are afraid that something might 'slip by' because it's a card that you have SD'd there's a remedy for that too. most MC/Visas have email/text alerts you can set up to notify you of a charge and if its a store - log in monthly- who knows you may have CLI!

As these banks are consolidating, that history you have with Bank X might come in handy down the road.

[Open123]

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@bs6054 wrote:

I think the case that OP was focussing on was card with no AF and no balance, but low CL, should it be closed?

This sort of question seems to always split the group, roughly falling into:

1) It certainly does no harm, and keeping it open will continue to help AAoA (rather than starting the X year clock after closure).  It also adds to overall CL, although very little, by hypothesis.

2) Too much work, checking for charges, newly instated AFs etc, and if you don't charge something from time to time (which costs rewards as you could charge this to better cards) it might get closed anyway.  

3) Some concern a set of low CL might look bad to future potential lenders.

I'm firmly in camp 2!   I find 1) unconvincing in the long term.  Most of us hope that credit will improve over time.  Closing them doesn't impact AAoA for at least several years, by which time we may have a much better credit picture that negates a decrease in AAoA, and the util gain is also swamped by new better cards/CL.

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In this case, I'm with you on camp # 2.  Eventually, aside from 3 or 4 personal cards, I'm going to end purging them all anyway.  

[wallyworld123]

I actually agree if there are not any fees associated with the card at hand keep it.

[webhopper]

To HiLine:

Answer to earlier question... I get the satisfaction of telling them my shoes cost more than the limit they gave me on the card so they should promptly increase or close.

[enharu]

here's my take on things. some of the above posters might have already posted the same thing as what i'm posting. sorry if i'm just repeating

If the card has no annual / monthly / any other ridiculous fees, just sock drawer it.

while a low limit card might not make any sense, there's no need to cancel it either. just sock drawer it. you already took the hit for the inquiry and for your AAoA, so might as well milk it completely for what it's worth. If it's a card that's been with you for quite a while, cancelling it will just lower your AAoA when the credit card stops reporting to the CRAs. The rule of thumb is that accounts continue to report for up to 10 years after closure, BUT that depends on the lender and CRAs. Equifax for example have been removing old closed accounts from CRs, and certain banks can't be bothered to report as well, causing the account to fall off shortly or within 10 years of account closure.

if you are worried about forgetting to pay for something, just set up FULL automatic payment. You might just be buying gum or some misc. charges on the card to keep it active anyhow, and you shouldn't be worrying about a $1-5 dollar payment to your CC from your checkings.

And to add, if your AAoA and oldest account age is already extremely high because of other cards, feel free to just cancel it then. Your AAoA isn't going to make a difference if it's going to drop from 15 to 10 years. It's already sufficiently high enough.

[cottontop]

Three reasons to keep open:

If it is your oldest, always keep it.  Its nice to go to a FICO scoring tool and see oldest account age at 20+ years.  Set it to pay in full each month, and put an auto pmt like netflix on it.

Second, recently I had an issue with Citi, the first thing the retention representative said was "wow, thank you for being a customer since 1993!"  Needless to say, I got what I wanted.  I may have other Citi cards, but will never close that old AT&T Universal now a CITI AA .

I think on manual reviews as well, it shows stabiltiy, even if only a few years of history are on the report, that 20 year + open date tells the UW that you haven't had an 11 year old bankruptcy.  In the back of their mind, they think he's been good for 20, probably still a good risk.  That is why you see FICO 680 approvals for cards that make you scratch your head when you got turned down with a 720.

[bs6054]

Two more reasons to close:

1) If the lender (e.g. Cap One) has a limit on the number of cards you can have with them.   Keeping the old ones may prevent you from getting better ones, at least without recon hassles

2) Churning for bonuses.

Just looked at my CR, it has 12 closed credit cards on it (and three store cards).  Probably 6 of those had AF, but I haven't regretted closing any.  If you have lots of accounts, one or two accounts eventually falling off (and yes 10 years may not always be the case, but most last at least 5 years) has no noticeable impact.

And as I said in my earlier post, doing small purchases on lots of cards isn't free, that spending (if really needed) could be on cards giving better rewards, and in many cases it might be "junk" spending, stuff you buy purely to make a purchase on the card, that you wouldn't otherwise spend.

My patronizing guess is that it depends where you are in your credit history, with a long credit history and a lot of good cards, the perceived value of keeping early cards open is very small and not worth the hassle.  Earlier on, there is a desire to protect every possible point of FICO score.

[HiLine]

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@webhopper wrote:
To HiLine:

Answer to earlier question... I get the satisfaction of telling them my shoes cost more than the limit they gave me on the card so they should promptly increase or close.

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Is that because your shoes are expensive or because the limit is small?