Do I have to keep my first credit card open forever? Forever ever?

plus picky otters + R.L. Stine
Money
July 14, 2021 • Issue #102
Dollar Scholar
Hi y’all —

They say you never forget your first.

My first screen name? DanceGal444. My first PG movie in theaters? Dinosaur. My first roller coaster? Woody Woodpecker's Nuthouse Coaster at Universal Studios in Orlando.

These experiences all hold a special place in my heart; they have great memories associated with them. But there are other firsts in my life that, while I won’t forget them, I don’t treasure quite so much. Like my first credit card.

I’m increasingly dissatisfied with my BankAmericard Visa Platinum Plus, which I opened at my bank in 2014 after graduating college. I didn’t know anything about credit cards, and I didn’t have much money, so it worked well enough at the time. But now that I’m older, wiser and have an AmEx, I want to get rid of it. The perks are non-existent, so I rarely use the card, and I’d kind of like to just shut it down and never think about it again.

Here’s the catch: I ALSO don’t want to tank my credit score. I know there are a bunch of strings attached when it comes to credit, and I worry I might be shooting myself in the metaphorical foot by closing the account.

Is it OK to close my first credit card? Or do I have to keep it open forever?

I called Bruce McClary, vice president of communications for the National Foundation for Credit Counseling, for help. He told me it’s a known fact that closing an open line of credit can lower my credit score — and make it harder for me to get approved for loans or additional lines of credit as a result.

One big reason my credit score might drop in this circumstance is because of my credit utilization ratio, a measure of how much credit I’m using as a percentage of my available credit. It’s recommended for people to always keep their credit utilization ratio at or under 30%.

My credit utilization ratio is calculated across accounts. Say I’ve got two credit cards, Card A and Card B, each with a credit limit of $500. My total available credit is $1,000, so my balances on the two cards combined should ideally not exceed $300. If I put $100 on Card A and $200 on Card B every month (and then pay it off), I’m fine.

But if I close Card A, my total available credit drops to $500. If I continue charging $200 on Card B like I was before, my utilization ratio jumps to 40% — and I start to get into the danger zone.

McClary says the exact formulas for calculating credit scores are a secret, but we do know that amounts owed make up 30% of a person’s FICO Score. That’s where my credit utilization ratio comes into play.
today in pandemic progress: took a Lyft for the first time in 18 months and my bank froze my credit card for unusual activity
Another reason my score could drop if I close my first credit card has to do with length of credit history, which FICO says takes into account “how long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all your accounts” among other factors.

“If you only have that one credit card account and you’re going to shut it down, you’re essentially shutting down any potential credit activity, and your score would plummet,” McClary says. “You’re essentially putting up the ‘closed for business’ sign on your credit history, and that doesn’t help you.”

Length of credit history makes up 15% of my FICO Score, so it’s not as big of a consideration as the credit utilization ratio. But it’s not insignificant, either, given how many parts of my life my credit score can affect (see: apartment applications, utility bills, cell phone contracts).

“It’s important that you have other open loans and lines of credit showing up on your report,” McClary adds. “The more variety you have on your credit report, the softer the impact will be if you close an older trade line because you’ve got other things happening that can help a potential lender determine your creditworthiness.”

I played devil’s advocate with McClary. What if I just leave the card open and stop using it, I asked him. Is that a loophole? Am I a genius?

He told me there’s not a huge problem with that approach, but I probably still have to keep paying annual fees on the account, so it might be a costly workaround. He also pointed out that the card issuer might not be a fan of my inactivity — and move to lower my limit or close the account. (This actually happened a lot last summer.)

If I totally ignore the card and don’t even look at the statements, I’m also putting myself at risk should a fraudster start racking up charges.

“If it’s not costing you in interest and fees, or if there are no other penalties for keeping it open and inactive, keeping it open could make more sense than shutting it down,” McClary says. "It's really up to each individual cardholder."
THE BOTTOM LINE
(but please don't tell me you scrolled past all of my hard work)
Closing a credit card is a personal decision. But if my heart is set on it, McClary said I should get my house in order before taking the plunge. I should make sure I have other lines open, my utilization is low (or 0!) and my accounts are all paid as agreed.

I also should time it right. If my score takes a hit from my account closure, it’ll likely take six to 12 months to bounce back.

“There is a little bit of a recovery period you can expect,” McClary adds. “I wouldn’t shut it down right before you apply for a mortgage [or] right before you go to the auto dealer and apply for a car loan.”
Devine
VIA GIPHY

RECEIPT OF THE WEEK
check out this wild celebrity purchase
Christina Clemons
VIA INSTAGRAM
When track and field star Christina Clemons qualified for the Olympics last month, she did it in style. The 31-year-old wore a pair of $8 earrings that look like tiny Cool Ranch Doritos bags, which made headlines and later inspired Doritos to send her a custom bag. Anyway, she bought the earrings at Hot Topic the night before the race, so BRB while I sprint to the mall.

INTERNET GOLD
five things I'm loving online right now
1 Does anyone want to lend me $173,000 so I can buy a haunted village? It’s three acres and comes with a private beach, forest and ghost. LMK and I can give you my Venmo.
2 I really loved this GQ interview with author R.L. Stine, who has written 150 Goosebumps books. He offers great thoughts on humor, horror and writing, but my favorite part of the story is when he complains about game shows. “What I hate about Jeopardy! is when I’m a question and nobody gets me,” he says. “I hate that!”
3 Tiny cow.
4 Turns out otters are NOT popcorn fans. Make sure you watch until (or fast-forward to) 4:02 to see the cutest picky-eater rejection ever.
5 At this point my primary joy in life is watching a Canadian dude rate Gen Z kids’ iced coffees on TikTok. I could scroll through his videos for hours. Basic ice, medium rare froth, no drizzle, save the turtles? 7/10.
 

401(K)9 CONTRIBUTION
send me cute pictures of your pets, please
weasley
VIA KRISTEN BAHLER
This is Weasley, a smiley pup who recently moved to Kentucky and will never close his first furedit card.

See you next week.
Julia
P.S. Have you ever closed a credit card? How do you make your iced coffee? Do you think I should live with a ghost? Send feedback to julia.glum@money.com and/or @SuperJulia on Twitter. I finally caught up on emails, so I am ready 4 u.
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