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Credit Card Basics

If My Credit Card Balance Is $0 Should I Close the Account?

The standard recommendation is to keep unused accounts with zero balances open. A zero balance on a credit card reflects positively on your credit report and means you have a zero balance-to-limit ratio, also known as the utilization rate. Generally, the lower your utilization rate, the better for your credit scores.

Closing the accounts reduces your available credit, which makes it appear as if your utilization rate has suddenly increased. An increase in your utilization rate is a sign of risk, and may result in a slight dip in credit scores.

From a credit scoring standpoint, you may want to keep the account open and make a small purchase once a month. You can pay the amount off immediately so that you aren't carrying debt and the activity on the account will demonstrate that you can manage credit and keep your utilization rate low.

If you don't use the card and have a strong credit history and credit scores, closing the account likely won't have a significant impact on your credit scores. Keep in mind, if you are planning to make a major credit purchase in the next three to six months, it's best to leave the account open.

Each scenario is different. Look at your overall financial picture and make a determination based on your own situation.

Learn more about how utilization rates affect credit scores.

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Scoped on: 12/30/2016

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