Should You Close Your Credit Card or Keep It Open?
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Should You Close Your Credit Card or Keep It Open?
For First-Time Credit Card Users in the Philippines
Introduction
Got your first credit card but thinking about closing it? 🤔 Whether it’s because you want to avoid annual fees, control your spending, or simply don’t use the card anymore, deciding whether to close your credit card or keep it open can significantly affect your credit score, financial flexibility, and future loan approvals.
For first-time credit card users in the Philippines, understanding the pros and cons of both options is crucial. In this article, we’ll guide you through everything you need to know — from how closing affects your credit score to practical tips for managing unused cards effectively.
Why This Decision Matters
Credit cards are more than just a tool for payments; they’re part of your credit history. Closing an account without understanding its impact can:
Lower your credit score
Reduce your borrowing power
Affect future loan approvals
Before making any move, let’s break down the pros and cons of keeping your credit card active versus closing it.
When You Should Consider Keeping Your Credit Card Open
1. To Maintain a Good Credit History
Your credit score depends heavily on the length of your credit history. The longer you keep your card active, the better it looks on your report.
Example: If you opened your first card in 2022 and keep it until 2030, your 8-year credit history will help you get better loan offers in the future.
2. To Improve Your Credit Utilization Ratio
The credit utilization ratio is the percentage of your available credit limit that you use. Keeping your card open — even if you’re not actively using it — lowers this ratio and helps improve your score.
Scenario:
Credit limit: ₱50,000
Current spending: ₱10,000
Utilization = 20% If you close a card with a ₱20,000 limit, your utilization could jump to 33%, which may hurt your score.
3. To Keep Access to Emergency Funds
Having an active credit card gives you financial flexibility during emergencies, like unexpected hospital bills or urgent travel needs.
4. To Enjoy Ongoing Rewards & Benefits
Some cards provide cashback, miles, or reward points. Even if you don’t use the card regularly, you can take advantage of perks like birthday promos, discounts, and travel insurance.
When You Should Consider Closing Your Credit Card
1. High Annual Fees with Low Usage
If the card’s annual fees outweigh the benefits you get, closing it may be the better choice — especially if you rarely use it.
2. To Control Overspending
If having multiple cards tempts you to overspend beyond your budget, keeping only one or two active cards can help you manage your finances better.
3. If You’re Upgrading to a Better Card
Sometimes, banks allow you to upgrade your existing card to one with better rewards or higher credit limits. In this case, you may not need the old card anymore.
4. If You’re Switching Banks for Better Offers
For example, if another bank offers lower interest rates or 0% installment promos, you may choose to close your old card after paying it off.
Before You Close a Credit Card — Important Steps
Step 1: Pay Off the Outstanding Balance
Make sure the card balance is fully paid before requesting closure. Otherwise, interest will continue to accumulate.
Step 2: Redeem Your Remaining Rewards
Some banks automatically forfeit your points once the card is closed. Redeem them before submitting your closure request.
Step 3: Check Your Credit Card Cost Impact
Before closing, use the Credit Card Cost Calculator to see how your interest rates, payments, and credit utilization may change.
Step 4: Call the Bank Instead of Cutting the Card
Don’t just cut the card in half! You must officially request cancellation through the bank so they can update your credit record properly.
1. Does closing my credit card improve my credit score? No. In most cases, it lowers your score because it affects your credit utilization and history.
2. Can I close a credit card with an outstanding balance? No. You must pay off the balance before the bank processes your request.
3. Should I keep my oldest credit card open? Yes. It helps build a stronger and longer credit history, which improves your score.
4. Will banks charge me for closing a credit card? No, but you need to settle any unpaid dues before they can close the account.
5. Can I reopen a credit card after closing it? In most cases, no. You’ll need to apply for a new card if you want it back.
