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TPG reader Francine send me a message on Facebook to ask about what to do with an older credit card account:
“I have a Citi AAdvantage Gold MasterCard that I opened in 1997. I don’t get much use out of it, but it has a long credit history. Should I keep the card or close it for a new one?”
I get questions like this a lot, as award travelers frequently have to evaluate whether it makes sense to continue holding a rewards credit card and paying the annual fee. Francine is paying $50 each year for a card that doesn’t offer much beyond a 25% discount on in-flight purchases and access to reduced mileage awards. Unless she’s regularly using that discount on award flights, she’s probably not getting a good return on her investment.
However, there are other factors to consider besides the published benefits, such as how closing an account can impact your credit score. Your length of credit history makes up 15% of your score, so while it’s not weighted as heavily as your payment history or utilization ratio, it’s pretty important. It’s worth keeping older accounts active for this reason alone, but that doesn’t mean you have to keep paying annual fees, and it definitely shouldn’t prevent you from getting new cards with more useful rewards.
Card issuers want your business and would rather have you keep an account open if it’s in good standing and there’s at least some chance you’ll use it. If your card doesn’t offer a bonus that justifies the annual fee, you should be able to downgrade your account to another card with a lower fee (or none at all). Citi offers a pretty wide variety of AAdvantage cards, including the no-fee Citi AAdvantage Bronze card. It doesn’t include reduced mileage awards, and offers a dismal earning rate of one mile for every two dollars spent, but it’s a good option to preserve your account and credit history.
You should also feel free to keep this account open and apply for a new one that’s more rewarding. Card issuers limit the amount of credit they’re willing to extend to each cardholder, but you can often transfer portions of your credit line between accounts. By downgrading to a card with no annual fee and lowering your credit limit as needed, you leave plenty of room for other cards in your portfolio.
One last note is that many card issuers may close accounts if there’s no activity over an extended period. If you’re keeping an account open for the sake of your credit history, be sure to use it at least once each year so it doesn’t get shut down unexpectedly.