Closing a credit card

[Anonymous]

I have been living in US for 24 months now and i had taken a secure credit card with BoA to start building my credit. It became a regular card after 12 months and i pay an annual fee of $ 29, but now i have my other cards which do not charge me an annual fee. My BoA card is coming for annual renewal and i am planning to cancel the card. Since it is my first card with longest credit history, will its cancellation impact my scores? Any advice?

[Anonymous]

The first thing I would do is try to call them to see if they will waive the annual fee for at least the next year.  Cancelling the card will make the following changes to your credit report:

-The average age of accounts will not grow as fast.  This is because you won't be adding another month onto this card after it's cancelled.

-The account will register on your report for at least 10 years until it is removed.

-Closing the account will lower your total utilization.  If you carry balances on your cards, this may increase your score.

If it was me... if BoA declines to remove the AF, I would dump them.

Message Edited by Cyan007 on 01-08-2010 12:47 AM

[Anonymous]

Hi RJ72! Welcome to the forums!

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RJ72 wrote:
I have been living in US for 24 months now and i had taken a secure credit card with BoA to start building my credit. It became a regular card after 12 months and i pay an annual fee of $ 29, but now i have my other cards which do not charge me an annual fee. My BoA card is coming for annual renewal and i am planning to cancel the card. Since it is my first card with longest credit history, will its cancellation impact my scores? Any advice?

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You've got a few options. My suggestion would be to request a product change to one of their cards that has no annual fee. If they won't grant the product change, ask to have the fee waived. If they refuse, ask again...

If you can't get a satisfactory resolution to your requests to get rid of that fee, and you decide to close your card, the positive tradeline will continue to report for up to ten years. The positive history and age will continue to bolster your score, just as when the card was open, and until the tradeline drops. The only aspect of that tradeline that would have the potential to negatively impact your credit score is if the loss of the limit increased your revolving credit utilization. If you carry any balances you'll want to be careful about losing available credit.

Message Edited by LilMirth on 01-08-2010 06:51 AM

[Anonymous]

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@Anonymous wrote:

The first thing I would do is try to call them to see if they will waive the annual fee for at least the next year.  Cancelling the card will make the following changes to your credit report:

-The average age of accounts will not grow as fast.  This is because you won't be adding another month onto this card after it's cancelled.

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I may be misunderstanding what you're saying here, but I want to point out that you will continue to add age onto your accounts - even after they're cancelled - as long as they're on your reports. Average Age of Accounts includes all (opened and closed) accounts on your report from the date they're opened until now. 

FICO does track AA of Open Accounts, but you rarely see it referred to here.

FICO does care if you have at least one bank/national cc revolving account.  So, if this is your only bank/national cc revolving account, you would lose points by closing it.  If you have other cards or accounts in this category, you're fine closing it.  FICO only needs one.

Look at the stickies at the top of this board.  Under "Helpful Threads" you can choose "Closing Credit Cards".  Hope that helps.  Good luck!

[Anonymous]

Thanks everyone for all the advice. My BoA account is a positive trade line and since FICO considers it as a positive trade line even after i close the account, it gives me flexibility to close. Closing does not increase my credit utilization as i don't carry forward balances and clear them every month. I also have other bank / national cc revolving accounts, so that should help in my decision.

As per all your advice, i called BoA for a annual fee waiver, but since they said they cannot waive for this account, i have cancelled the account and may take some time to decide if i need apply for another card.

I am glad to post my query here, thanks for the super fast and insightful responses. 

[Jazzzy]

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@Anonymous wrote:

Thanks everyone for all the advice. My BoA account is a positive trade line and since FICO considers it as a positive trade line even after i close the account, it gives me flexibility to close. Closing does not increase my credit utilization as i don't carry forward balances and clear them every month. I also have other bank / national cc revolving accounts, so that should help in my decision.

As per all your advice, i called BoA for a annual fee waiver, but since they said they cannot waive for this account, i have cancelled the account and may take some time to decide if i need apply for another card.

I am glad to post my query here, thanks for the super fast and insightful responses. 

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First, I agree with your decision to close the account. If you are not getting a big enough benefit from a card with an annual fee, there's no reason to keep it.

I just wanted to point out one thing about credit utilization. You say that you pay your balances every month. That's good. Just be aware though, that, even if you do, most credit card companies report your statement balance to the credit bureau. So, if you don't pay your balances until after you get your statements, then you do show utilization. You say that you have other cards, so hopefully closing this one won't negatively affect your reported utilization.