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NEW YORK (
MainStreet) -- We've always cautioned
readers to think twice before closing a credit card since doing so could hurt your credit score.
Account closures can have an effect on your credit-to-debt utilization ratio, especially when the card in question has a particularly high credit limit. Additionally, they can cost you the bonus points awarded by certain models when you have what's considered an ideal number of cards in your wallet.
It's always wise to think twice before closing a credit card, but there are situations where it's warranted.
It can also have an impact on the
age of the credit file, but not in the ways most people think. Closed accounts actually continue to appear on a person's credit report for 10 years after a customer has formally gotten rid of the card, so those who replace the card with another product aren't likely to see much damage down the road; their new cards will have supplemented their credit history.
Regardless of these potential consequences, there are certain instances where closing an account is certainly warranted. We take a look at these situations and outlines how you can minimize the damage done to your credit score.
Your annual fee is too high. Rewards cards are known for
carrying high annual fees, which cardholders are required to pay whether they're actively using them or not. Those who aren't spending enough to reap the rewards and justify the annual fee may feel it's time to close the card and take their business elsewhere. (There are certainly decent rewards cards out there that don't have
an annual fee attached.)