Closing a credit card isn’t always great for your credit score. If you’re closing your oldest credit card, for example, it might reduce your overall age of credit— and the credit bureaus often dole out a few extra credit score points for people who have maintained the same credit accounts for, like, decades.
You might also see your credit score drop if closing a credit card negatively affects your credit mix (since credit bureaus like to know that you’re able to manage multiple types of credit, such as credit cards and car loans).
But it’s more likely that your credit score will be affected by one simple factor: when your total available credit drops, so does your credit score.
Unless, of course, you’re able to raise or reallocate your credit before you close the card.
Raising your credit is relatively easy. The majority of online credit card accounts give you the option to request a credit limit increase (it might be hidden under a menu called “settings” or “manage,” but it’s there). If you’ve been a responsible credit user, you could get a quick credit boost—and your increased credit limit can compensate for the credit you’re losing when you close your old card.
But you can also try to reallocate your credit. As The Points Guy explains, it is possible to move a portion of your available credit from one card to another, as long as both cards are under the same issuer (Discover, Chase, Amex, etc.).
Card issuers are often willing to transfer at least some of your credit from one account to another. This requires a phone call in most cases, but American Express facilitates the process by allowing you to shift credit between accounts online.
I will admit that I’ve been writing about credit cards for more than half a decade and I had never heard of this. However, it is very definitely a thing—and in addition to using to maintain your available credit when you close a credit card, you can also use it to maximize your credit card rewards (by transferring your credit limit to a card that offers higher rewards, and then increasing your spending on the higher-reward card).
That said, credit card issuers don’t always make it easy to reallocate credit. American Express appears to still allow users to transfer credit from one account to another online, though I couldn’t confirm this myself since I don’t have an Amex card. Capital One, according to the FICO forums, recently canceled a similar feature. When I checked my own online credit card accounts, I wasn’t able to find any credit transfer/reallocation menu options—though it was easy to spot the menu options that allowed me to request a credit limit increase.
So it might be better to ask for a higher line of credit than to try moving credit from one card to another (unless you really, really like calling customer service).
But if you’re going to close an old credit card, try to get at least one of those options taken care of before you take the hit to your available credit.
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December 14, 2019 at 12:30AM
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To Maximize Credit Card Rewards, Transfer Your Limit Before Closing a Card - Lifehacker
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