Take the 2-minute tour ×
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.

I currently have a MasterCard from a bank that I am unhappy with. I want to get another MasterCard from a different issuer.

Should I close my current account then open the new account? The other way around?

Are there any benefits or implications to the order I do this in?

If it matters I am not overly concerned about my credit score. I have two credit cards (approx $9000 credit limit between them), a mortgage, a single car loan (nearly paid off), and the usual utility bills. All my debts are paid in full every month . My score is currently high.

The card I want to close is used for recurring pledges and donations, at places where Visa is not welcome, and for work travel. Generally about $200/month and then a few thousand every quarter for work travel.

share|improve this question

3 Answers 3

up vote 6 down vote accepted

You must leap frog.

Open the new account (which increases your credit limit and decreases your utilization, therefore increasing your credit score a tad) then close the old account a bit later. Closing will have opposite effect on your score. (Decreasing your overall limit and increasing your utilization.)

Unless you are paying an annual fee, I wouldn't bother actually closing the old account, just stop using it and shred the cards. The bank will close it for you eventually.

By the way, if you are planning on letting it expire, don't forget to keep it up to date in your budget or tracking software. And don't lose any online account information either. You still need to pay attention to it for odd activity and keep it secure.

If you are paying an annual fee, and it is due soon, then I would suggest closing it after you have your new card to avoid the fee.

share|improve this answer
2  
+1 - The issue of utilization depends of course on the card limits and how much the OP charges each month. If he holds the card for emergency use, but doesn't use it regularly, there may be no impact at all. In fact, simply using the card a bit each month and paying in full would push utilization above zero and help his score. –  JoeTaxpayer Nov 27 '12 at 17:07
    
You've answered my question about the order. I disagree with your statement about not closing the account, it seems like a risk and requires ongoing effort on my part to let the account sit open and idle. I have updated my question with general background info, I doubt that changes the answer. –  Freiheit Nov 27 '12 at 17:18
2  
@Freiheit - up to you. Closing will "hurt" your credit score more than letting the bank close it, but honestly the real world effect is probably nothing. I bet you could close it afterwards and forget it ever happened 4 months later. –  MrChrister Nov 27 '12 at 17:23
1  
I have several cards that I haven't used for multiple years but haven't bothered to close (both due to the hassle of arguing with someone on the phone, and because I want to have one card with a much higher limit than my day to day cards for emergency purposes) and in no case has the bank closed the account for me instead of keeping a few rows in its DB in the hope that I'll eventually decide to charge something on it. –  Dan Neely Nov 27 '12 at 21:35
    
@DanNeely - you would be an anomaly. Those cards are showing up as active on your latest credit report? I would not rely on an unused card for an emergency. Better to use it every six months for a tiny transaction to keep it active. –  MrChrister Nov 27 '12 at 21:47

Regarding leap frogging:

The card I want to close is used for recurring pledges and donations, at places where Visa is not welcome, and for work travel.

In order to switch the recurring pledges and donations from the old card, you need a new card to switch them to. If you close the account before the new account is established, this would be a multistep process. You will either have to move the recurring charge to an existing account or temporally stop them.

There is also a risk that the new account might take longer then you imagined. If you cancel the first one before getting a new one, you could be caught short just when you needed the card.

share|improve this answer

This is only in response to the comment regarding closing the account vs MrChrister's advice to leave it open.

number of credit accounts

Over the long term, one's score improves with a seemingly high number of accounts. Closed accounts are part of the count, but fall off after a time, so it's good to keep some number active especially when starting with so few. My own score reflects "10 open, 19 closed" as a result of multiple mortgage refinances and cards with no fees that I don't use, but kept open.

Take his advice or not, but be aware, each aspect of the credit score does have an impact.

share|improve this answer
    
Does "accounts" mean credit card accounts specifically, or any open account for debt or regular payment? –  Freiheit Nov 27 '12 at 17:34
1  
From creditkarma.com/report/totalaccounts "Total accounts is another measure of your creditworthiness. Consumers with more credit accounts generally have better credit scores because it means more lenders are willing to grant credit. This metric represents the total number of accounts listed on your credit report. A breadth of different account types is indicative of good credit." These include all accounts that report to the credit bureaus. –  JoeTaxpayer Nov 27 '12 at 17:44

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.