The average Canadian consumer had an average credit card balance of $2,121, according to a recent Equifax Canada survey.
Many Canadians have one or two old credit cards that they no longer use. Before you jump to close your old, unused credit card, here are some of the pros and cons of closing a credit card account, so you can make the most informed decision.
WOULD CLOSING YOUR OLD CREDIT CARD IMPACT YOUR CREDIT?
Credit cards can be successfully leveraged to improve your credit rating, convincing lenders that you’re a trustworthy borrower who pays their debts on time. Conversely, carrying over large balances, missing payments, or applying for too many credit cards in a short amount of time can hurt your credit rating, according to Equifax.
What about old credit cards, though?
According to Equifax, some of the key factors that play into your score are:
- Payment history
- Credit utilization
- Amount of available credit
- Total length of your credit history
- Hard credit inquiries
- Public records
HOW CANCELLING A CARD CAN AFFECT YOUR CREDIT RATING:
Total available credit
Closing a credit card will immediately decrease the amount of total available credit that you have access to. For example, if you have $10,000 worth of available credit, and you close an old credit card with a $2,500 limit, then your updated amount of total available credit will be just $7,500.