Cancel Credit Cards

It seems from what you posted that it won't be that big of a deal, but it really depends on your credit utilization. Are you using around 10% even with the card cancelled? Or will it shoot higher? If it won't, I wouldn't worry too much.

Also, there are plenty of cards out there that don't have annual fees. If you really want to have a larger amount of available credit, you can easily get some with a 735 score.

Another consideration is what you plan to do in the next 12 or so months. If you don't plan on buying a car or house your FICO score doesn't really matter that much. Go ahead and cancel. If, however, you plan on making a large purchase with credit you might want to hold off on cancelling until afterwards.

When thinking about canceling a credit account, there are two very important things to consider:
1) Average age of accounts and oldest account.
2) Total credit extended individually, combined and utilization of credit.

Regarding #1, you generally want to keep your oldest accounts active and alive. The longer you can show a positive credit history, the better your score/etc. Even if the card sucks from a rewards or fee point of view, if it's the oldest one you have, especially if the second oldest is much newer, you should try and keep it open. So, with all other things being equal, if you have to close an account, make sure it's the newest one you have.

With #2, there are a few variables to consider. Some important things about good credit is the amount of credit you have (individually and cumulatively) and, most importantly, your debt to credit ratio. In order to keep your credit score/report looking good, you NEED more credit then you....need. If you routinely spend $1000-2000/month on credit cards, and even if you pay them off in full every month, you might think that a $2000 credit limit is sufficient - it's not. You should try and keep your D2C ratio below 20%, and the lower the better. So a $10k CL card would be ideal with that theoretical spending pattern. Remember, when someone (or something) looks at your credit report, there is no way to tell the difference between someone who spends $X amount every month and pays it in full versus someone who spent $X three years ago and is still paying only the minimum monthly payments.

So, along those lines, try to keep your accounts with the highest credit limit active and alive. Closing those, depending on your usage and other accounts, could have a negative impact.


Also, there is a lot of misconception about the need to not have too many accounts open at the same time. In general, this is perfectly fine. The only time it can become an issue is if you have a TON of available credit and apply for more (generally unsecured). But that usually isn't an issue for things like car loans or mortgages. But if you had, say, $100k in available credit and went to apply for another card, the issuing bank (especially if they have already extended you credit lines) might not be willing to assume any more risk. But honestly, you aren't at that point yet. A study was done on people with extremely high credit scores, and those people usually had a lot of open accounts (like 20+). It's not really a bad thing.

The annual fee is a factor, but you might be able to convert that account into one without a fee.

Oh, one last thing. It is better for you to close an account versus the creditor. So if you think that they are about to do such a thing, it could be a good idea to preempt them.