When To Close Credit Cards With Zero Balances

Written By Mary Beth Eastman
Last updated September 20, 2018

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September 20, 2018

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If you have paid down the balance on some of your credit cards, congratulations! That is a great step toward financial freedom and having lower balances on your cards looks great to creditors. Plus, you don’t have to pay off all those pesky bills every month. It might be tempting to close those cards out so that you don’t suddenly use them to splurge on a new outfit or a trip to the beach – but there are some different things to consider before you make a decision on whether or not to close them out. Check out these tips.

The first question you should ask if whether or not it makes sense to close out your card with a zero balance. Do you need to cancel it? Or will you be able to put it away and not use it? The benefit of keeping a zero balance card open is that it has a great impact on your credit score. Anyone examining your score looks at your debt-to-credit ratio, which means the amount of existing balance you have on your cards vs. the open space you have on your cards. Sometimes keeping a card open with a zero balance can significantly boost your credit score.

Although it can boost your credit score to have a card with no balance, if there is an annual fee to pay, you might have to think twice about keeping it open. Some credit card companies charge an annual fee of $35, $75, $100 or even more and that can be a lot to keep up with, or justify spending, when you aren’t even using the card. If you have a card that has no annual fee, it makes much more sense to keep it open with a zero balance. Consider switching to one of the best credit cards with no annual fee if necessary.

Credit cards can be dangerous because they technically allow you to spend money you don’t have! But the alternative to that is that they give you a little peace of mind in the event of an emergency situation. If you have a car problem, health issue, your air conditioner goes out during a heatwave, etc. it can be very useful to have an open card with zero balance to help you out in a pinch.

The bottom line is that if you are able to resist the urge to keep using the card to purchase more things, it can often benefit your credit and give you a little cushioning to keep it open.  But if there are excessive fees involved, it’s probably best to be smart and ditch that particular card.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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