Paying off a credit card is a major achievement. You worked for months or even years to achieve this goal. So now what? One of the most common questions is whether you should close a credit card once it’s paid off.
The short answer: it depends on your financial habits and goals. Below, we’ll break down the pros, cons, and key factors to consider so you can make the best decision for your situation.
What Happens When You Close a Credit Card?
Closing a credit card means the account is no longer available for use. You can’t make new purchases, and the credit limit is removed from your total available credit.
While closing a card doesn’t erase your payment history right away, it can affect your credit profile in other ways - especially your credit utilization and, over time, your credit history length.
Pros of Closing a Paid-Off Credit Card
Closing a credit card can make sense in certain situations, particularly if the card caused problems in the past.
Reduces the Temptation to Overspend
If having access to credit makes it hard to stick to a budget, closing the card can remove that temptation entirely. For people rebuilding from debt, this can provide peace of mind.
Simplifies Your Finances
Fewer open accounts mean fewer statements, alerts, and due dates to manage. This can make it easier to stay organized and avoid missed payments.
Limits Fraud Risk on Unused Accounts
An open card you rarely check can be more vulnerable to fraud. Closing it removes the risk of unauthorized charges slipping by unnoticed.
Makes Sense for Expensive Cards
If the card has an annual fee or terrible terms, closing it after paying it off may be the smartest option.
Cons of Closing a Paid-Off Credit Card
From a credit score standpoint, closing a card can have downsides.
Higher Credit Utilization
Credit utilization measures how much of your available credit you’re using. When you close a card, your total available credit drops, which can increase your utilization ratio—even if your spending stays the same.
Higher utilization can negatively affect your credit score.
Loss of Credit History Over Time
Although closed accounts stay on your credit report for years, they eventually fall off. When that happens, you may lose the benefit of a long, positive payment history.
If the card you paid off is one of your oldest accounts, you should consider keeping open. Make one small purchase on it each month and pay that off every month.
When Keeping the Card Open Is Usually Better
In many cases, keeping a paid-off credit card open is the better move, especially if:
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The card has no annual fee
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You’re confident you can avoid racking up a balance
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It’s one of your oldest accounts
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You’re working to improve or maintain your credit score
You can keep the account active by making small purchases occasionally and paying the balance in full each month.
When to Close a Paid-off Credit Card
Closing a credit card may make sense if:
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You’ve struggled with overspending on the card
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The card charges any annual fee
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Your mental health would benefit from one less thing to keep track of
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You don’t need the available credit
In these cases, the emotional and behavioral benefits may outweigh the credit impact.
It's Your Decision
You don’t have to close a credit card just because it’s paid off. Still, closing a card can be the right choice if it helps you avoid debt and stress.
The best decision is the one that balances your credit goals with your real-life spending habits.