In most cases, no. Once you’ve paid off a balance transfer card, keeping it open usually helps your credit more than closing it.
I totally understand the need to clean house and minimize your card footprint. Especially for cards you don’t use. But closing old cards often works against you.
The one real exception is if your card has an annual fee. Most balance transfer cards don’t, but that’s the only reason you’d need to cancel the account.
Why closing a paid-off card hurts your credit score
Closing a paid-off credit card usually lowers your credit score, at least in the short term. Two things drive that drop.
The first is credit utilization, which compares your balances to your total credit limit. Closing a card erases part of your overall credit limit, so the same balance takes up a bigger share.
The second is account age. Your average account age can fall if the card is one of your older ones. Neither drop is huge for most people, but the timing can sting if you plan to apply for a loan soon.
When closing your balance transfer card makes sense
Closing your balance transfer card makes sense in two situations. The first is an annual fee you no longer want to pay. Most balance transfer cards charge no annual fee, though, so that reason often doesn’t apply.
Right now I have four cards in my name, and not one charges a fee. Carrying a few is common — most Americans have one to three, per Motley Fool Money research — and there’s no penalty for holding more, as long as they’re free of annual fees.
The second reason is more personal. If an open card tempts you to run the balance back up, closing it protects you from yourself.
How to stay out of debt after you pay off the card
If you’ve just finished paying off your debt, congrats! Now the challenge is to stay out (and build wealth instead).
Staying out of debt comes down to habits, not willpower. I’ve never paid a cent of credit card interest, and I stick to three simple rules…
First, I autopay my full balance every month, never the minimum. Second, I only put a purchase on a card when the money is already in my account. Third, I never overspend just to chase rewards.
If you can stick to these basic habits, you’ll never slip back into credit card debt.
Keep the card open, but switch your spending to a rewards card
A balance transfer card is usually a one-trick pony. It’s built to clear debt cheaply, not to earn rewards.
So once you’re debt-free, everyday spending on it earns you nothing. You may as well move that spending to a rewards card and start earning cash back or travel rewards. If you want to compare options, start with the best rewards credit cards.
You already did the hard part by clearing the balance. Now the smart move is almost boringly simple. Keep the card open, quit spending on it, and let it work quietly in the background while a rewards card does the heavy lifting.
