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I have four credit cards. One has a cash back rewards, one a discount, and the other two do nothing for me. However, one of those two is my oldest card, so I cannot close that account.

I would like to take advantage of more of the cash back rewards. Should I cancel one or two of those credit cards to open another up? My FICO score is above 720 but I'm not sure if canceling a card would hurt it, or what it would do. I don't have a balance on any of them as I pay them off right away. Should I do nothing? I also don't like having four cards and would really like to only have two or three.

5

Cancelled cards don't fall off the system for a long time, up to ten years. Card terms change, with notice of course, but it can happen at any time. I had a card with a crazy perk, 5% back in Apple Gift cards. This was pre-iPod days, but it was great to get a new computer every two years for free. But it was short lived. Three years into it, the cards were changed, a no-perk card from the bank. That is now my oldest account, and it goes unused. Instead of holding cards like this, I wish I had flipped it to a different card years ago. Ideally, your mix of cards should provide value to you, and if they all do, then when one perk goes away, it's time to refresh that card.

credit age

This is a snapshot from my report at CreditKarma. (Disclosure, I like these guys, I've met their PR folk. I have no business relationship with them) Elsewhere on the page it's noted that average card age is a 'medium impact' item. I am 50, but I use the strategy above to keep the cards working for me. My current score is 784, so this B on the report isn't hurting too much. The tens of thousands I've saved in mortgage interest by being a serial refinancer was worth the hit on account age, as was the credit card with a 10% rebate for 90 days, the 'newest account' you see in the snapshot.

In the end, the score manipulation is a bit of a game. And some of it is counter-intuitive. Your score can take a minor hit for actions that would seem responsible, but your goal should be to have the right mix of cards, and the lowest interest (long term) loans.

4

You're right to keep the oldest one. That's an asset to your credit rating.

Since you're already responsible with your credit, a dip in your credit rating doesn't really matter unless you're looking for another loan, like a mortgage.

I personally like the cash-back rewards because they're the most flexible, so you have a good thing going with that card.

Do those reward cards give you perks on all of your purchases? If they do, then look carefully to see if you can do noticeably better with another card. If not, it may not really be worth it.

Regarding cancelling one of the cards, I wouldn't, and here's why. Your cards can get compromised, and sometimes more than one gets compromised at the same time. I was glad that I had three cards, because two of them got hit the same day. Hence, having three cards hit on the same day is possible, and you'll be glad that you have the fourth.

4

Hits to your credit rating for canceling one of the newer cards will be a small hit for a few months.

You do have some options.

  • See if the bank that issued one of you less desirable cards has another card with a better set of perks. Some companies will be happy to switch you into one of the better cards. This can have zero impact on the credit score because it is still an account with the same bank. Sometimes the switch to a gold card gives you better perks, other times the same level card is available with different perks: cash back, miles, gas rewards...
  • If the issue is not enough of a credit limit on your favorite card, check the website to see if you can request a credit limit increase. You can also call their toll free number and ask.

I also believe that a person with good credit should have multiple cards: I like having a cash back card for the majority of our transactions. Unfortunately that card isn't accepted everywhere, so I have two other cards with broad market coverage to make sure we always have an option if the vendor doesn't take the main card.

Also having multiple cards makes sure that if there is an issue with one card you are never caught without a card. One time the main card was rejected by a gas station because my wife just used the same account to buy gas across town. When we got home their was a fraud alert message on our phone.

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