Topics, Tips & Tools / Expert Insights

Should I close a credit card after paying it off? [Video]

18 January 2016

The widespread availability of credit cards makes it very easy to spend frivolously on credit. That is why it is so important that you carefully assess what you need to use a card for.

Limiting the amount of money you spend each time you use the credit card makes excellent sense, and always be certain that whatever it is you purchase falls into the ‘essentials’ category.

However there are reasons for and against closing a credit card facility. Let’s start off with why it might be a good idea to keep it open

It’s a recognised credit source. If you have no other loans or sources of credit, you could keep your credit card open. By doing this and using it sensibly you could improve your credit score.

Another factor you may want to take into consideration is that a long credit history could also contribute to an improved credit score. While you may want to close some of your newer cards, you might want to keep the older ones open and maintain them well.

Of course there are also reasons why it may be better to close your credit card.

A more recent concern among consumers is identity theft. While this is a worldwide phenomenon, in South Africa it is estimated to cost the country some R1-billion annually. For this reason many people choose to close their credit cards, believing that by doing so they will lessen the risks of their identities being stolen

Another, far more straightforward reason why people choose to close their credit cards is that they simply don’t use them anymore.