Why You Should Keep Your First Credit Card

So you’ve finally outgrown your first credit card with its tiny spending limit and moved on to a fancy new card with several thousand dollars open—congratulations! It’s a great feeling and a sign that you’re on the right path with your finances. But, wait! Don’t throw away or cut up your old card (or cards). Those cards have two very important values:

Increased Spending Limit

When credit agencies calculate your credit score, they look at your overall spending limit. That’s the sum of each of your credit cards’ spending limits. If you have a credit card with a $500 spending limit and one with a $3000 spending limit, your available credit is actually $3500. This works in your favor especially when your balance is higher than usual. If you only have the $3000 card, you must avoid carrying a balance higher than $600 (20%) from month to month. But by simply keeping the other card open, that 20% balance is now $700—a much more flexible limit.

Improved Credit Score

A longer credit timeline is one of the 5 parts of a good credit score. Keeping older cards open extends your credit history. Keep all your cards open. Use them for automatic payments, such as a small monthly subscription fee, then pay them off in full each month. That’s 15% of a great credit score and it costs you nothing.