(CNN) – Many of us may think that the best way to stop overspending is simply to cancel your credit card.
Experts say canceling your credit card may do more harm than good. (Source: CNN)
Experts say this could actually hurt your credit score.
Parting ways with the cards may seem like a good idea to avoid getting into further debt, but that’s a decision many people may not realize can do more harm than good, according to a recent survey by Bankrate.com.
That’s because canceling a card you’ve had for a long time shortens the average age of your credit history, and under many scoring models, that means a lower credit score.
Experts recommend that you should just keep old accounts open, even if you don’t use them, which will positively impact your credit score.
But just 42 percent of credit card holders surveyed knew about the negative impacts, while 15 percent didn’t think there was any effect at all.
Older generations are more likely than younger consumers to have closed accounts.
Seventy-two percent of baby boomer cardholders have canceled at least one card, compared to 61 percent of Generation X cardholders and 50 percent of millennials.
The most popular reasons for canceling are having paid off debt, not using the card enough, and high interest rates or annual fees.
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