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Closing a credit card with a zero balance could impact your credit score. See the pros and cons of closing a zero balance credit card.
You finally sent in that last payment and your credit card has a zero balance. After you’ve congratulated yourself for paying it off, you plan to call the lender and close your card.
But before you do, it’s important to note that closing down a card with a zero balance may not be the best move for your credit score. Let’s explore some situations where closing down a credit card with no balance may, or may not, be a good idea.
Having credit cards with no balance can be beneficial in many ways. Though carrying a balance month-to-month may seem pointless for some, keeping open unused credit accounts actually helps build your credit health.
How Do Zero Balance Cards Impact Your Credit Score?
Here are some key ways that having zero balance credit cards affects your credit score:
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Longer Credit History: Keeping old credit cards open, even if you don’t use them, makes your credit history longer. This factor is used to calculate your FICO credit score.
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Lowers Credit Utilization With a higher total credit limit from multiple cards, your credit utilization ratio decreases even if your balances stay the same. This ratio makes up 30% of your credit score.
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The fact that you make payments on time and keep your balances low shows that you are responsible with your credit. Your payment history is the most important factor, making up 35% of your score.
It may seem harmless to close credit cards you don’t use, but it can hurt your credit score by cutting down on your history and making you use your cards more. People who have had good credit for a long time, on the other hand, probably won’t see a big change in their scores.
Should You Ever Close Zero Balance Accounts?
In certain cases, closing credit cards makes sense even if they have no balance:
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If you’re tempted by easy credit, you might take on more debt. Eliminate the temptation if you lack spending discipline.
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You have marginal credit and high utilization already. Losing available credit could drop your score, so focus on paying down debts first.
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The card has an annual fee that’s no longer justified by rewards or other benefits. Cancel cards that cost more than they provide in value.
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The card issuer closes your account due to long periods of inactivity. This is common with store credit cards or unused older accounts.
Overall, avoid closing multiple long-held accounts soon before applying for new credit. And if you do cancel, remember closed accounts stay on your credit reports for 10 years, so their positive history still counts.
What Are the Drawbacks of Carrying a Credit Card Balance?
Carrying a revolving balance on credit cards results in interest charges, and over time, compounding interest. This is how credit card debt spirals out of control quickly.
Some key drawbacks of maintaining balances month-to-month include:
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High Interest Rates: Credit cards often charge double digit interest rates. Even a small purchase balance can add up with interest.
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Increased Costs: You end up paying more for purchases carried over months or years due to interest fees.
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Higher Credit Utilization: Maxing out cards or maintaining high balances hurts your credit score by signaling higher risk.
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Difficulty Tracking Spending: Carrying debt across billing cycles makes it harder to stick to a budget and manage cash flow.
Paying in full avoids wasted money on interest and shows lenders you can manage credit wisely. But carrying some balance doesn’t automatically doom your finances as long as you make payments on time and keep the balance low.
How Do Rewards Work If You Don’t Carry a Balance?
Many credit card users wrongly believe you need to maintain a balance to earn rewards points or cash back. But rewards are based on your spending, not whether you carry debt.
As long as you use a rewards credit card for purchases and pay on time, you still earn benefits. And you avoid canceling out rewards value by paying interest charges.
Here are some types of rewards you can earn without carrying a balance:
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Cash Back: Get 1-6% back on purchases to redeem for statement credits, bank deposits or gift cards.
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Points or Miles: Earn points to redeem for travel, gift cards, and other rewards. Miles go towards free flights.
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Intro Bonuses: Meet initial spending requirements with purchases to earn huge sign-up point bonuses.
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0% Promotional Offers: Take advantage of 0% interest periods for balance transfers or new purchases.
Sticking to no-annual-fee rewards cards with valuable perks ensures you come out ahead, even if you pay in full each billing cycle.
How Do Credit Cards Build Your Credit If Used Responsibly?
You can build credit simply by using a credit card for small, regular expenses and paying on time and in full each month. Responsible credit card habits help your credit in a few key ways:
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On-Time Payments: Making at least the minimum payment every month builds your track record of responsible repayment over time.
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Credit Mix: Having both installment loans and revolving accounts like credit cards demonstrates you can manage different types of credit successfully.
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Lower Utilization: Keeping balances low compared to your total credit limit makes you look less risky to potential lenders.
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Credit History Length: Long-open credit accounts show you have years of successful credit management experience.
Even using a credit card just for one monthly bill, like a streaming service subscription, can establish positive history, especially for credit beginners.
Tips to Use Credit Cards Responsibly Without Debt
Here are some tips to enjoy credit card benefits without falling into the trap of ballooning debt:
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Pay in full each billing cycle – Set up autopay if needed to avoid missed payments and interest charges.
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Track expenses closely – Check your balance and transactions regularly to catch overspending early.
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Limit cards carried daily – Only carry cards you actually use to reduce impulse spending temptation.
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Choose no-fee rewards cards – Avoid cards with annual fees unless the perks outweigh the costs.
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Set budget limits per category – Assign maximum spending amounts for gas, groceries, etc based on your income.
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Build an emergency fund – Have cash reserves for unexpected expenses so you don’t need to use credit cards.
The Bottom Line
At the end of the day, having open unused credit cards strengthens your credit health rather than hurting it. And you can earn rewards through everyday spending without paying a cent of interest.
Responsible credit card habits like paying on time and keeping balances low demonstrate financial maturity. So don’t close long-held zero balance accounts without good reason. And avoid carrying debt month-to-month when you can pay in full.
The Relationship Between a Credit Card and Your Credit History
The length of your credit history constitutes 15% of your FICO credit score. 1 The two factors that influence this portion of your score are the age of your oldest account and the average age of all your accounts. So, if you owe payments on multiple credit cards and would like to close one, you could consider paying off and closing the newest card first. 5.
Of note, a closed account could remain on your credit report for a number of years. Accounts that are closed in good standing may stay on a credit report for ten years, whereas accounts that contain adverse information could remain on a report for seven years. 5.
How a Credit Card With No Balance Affects Your Credit Utilization Rate
The ratio of how much credit you use to how much money lenders are willing to lend you is called your credit utilization ratio. Your credit utilization ratio is one significant factor used to determine your credit score. According to the FICO scoring model, it makes up 30% of your credit score, and the AdvantageScore model calls it “highly influential.” 1 It’s recommended you keep your credit utilization ratio below 10%. 2.
If you choose to close a credit card with a zero balance, your total credit limit will decrease. This means that your credit utilization ratio will go up, especially if you have other credit cards with balances. 3.
For example, let’s say you have three credit cards with a $5,000 limit on each for a total credit limit of $15,000. If you have zero balance on one card and a total balance of $5,000 across the other two, that’s a 30% credit utilization ratio – the upper limit of the recommended zone. So, if you close the card with a zero balance, your total credit limit drops to $10,000 and the same $5,000 balance is now a 50% utilization ratio, as seen in the accompanying table. That’s a situation that could shave points off your credit score.
Impact of Closing Zero Balance Credit Card on Credit Utilization Ratio
| Credit Cards | Credit Limit on Each | Total Credit Limit | Credit Balance | Credit Utilization Ratio |
|---|---|---|---|---|
| 3 | $5,000 | $15,000 | $5,000 | 30% |
| 2 | $5,000 | $10,000 | $5,000 | 50% |
A Warning About 0% Balance Transfer Credit Cards #shorts
FAQ
Is a zero balance on a credit card bad?
Having credit cards with zero balance is actually good for your credit score. It results in a low credit utilization ratio, which positively impacts your score. However, it could be bad if you open too many credit cards with zero balance just to have a high number of accounts.
Should I keep my credit card open if I have a zero balance?
In general, even if you aren’t actively using your credit card and you have a zero balance, it’s still a good idea to keep the account open. That’s because the credit limit on each card you have counts toward your overall credit utilization ratio.
Should you keep a credit card account with no balance?
Maintaining a credit card account with no balance can actually be a smart strategy. It allows you to build credit without the risk of incurring unsustainable debt. So, the short answer to the question is yes, it can be beneficial.
Does a zero balance credit card improve your credit score?
Having a Zero Balance Credit Card May Help If you plan to apply for additional credit for a big purchase – such as a mortgage, home equity line of credit, or car loan – within a year after paying off a credit card, keeping it open with a zero balance may strengthen your credit score.
Is carrying a credit card balance good for your credit score?
It’s a common myth that carrying balances on credit cards is good for your credit score. The truth is that paying your credit card balances in full each month generally is a good bet. But what if you have credit cards you no longer use that have zero balances? Is it bad to have a credit card you never use?.
Can I Keep my Card if my balance is zero?
If your balance is zero because you use your card and pay any balance off in full at the end of every billing cycle, you can keep the card indefinitely. But if your account remains inactive for some time with a zero balance, the issuer may cancel your account.
Is it good to have a credit card with no balance?
… a zero balance can help your credit score if you’re consistently using your credit card and paying off the statement balance, at least, in full every monthApr 9, 2025.
Is it better to leave credit cards open with zero balance?
A zero balance is best. You never want to carry a balance on a credit card. You will be wasting money this way by paying interest. The only exception to keep a balance is, having a 0% promotional rate for a year. This will give you a chance to pay off the card before fhe expiration period ends.
Is it worth keeping credit cards you don t use?
Keeping a card that you’ve had for a long time can improve the length of your credit history, even if you don’t use it. May 2, 2025.
Is it bad to never carry a balance on your credit card?
If you have no balance on your credit cards, your credit utilization ratio is zero, which could negatively impact your credit score. The exact impact on your credit score will depend on various factors such as your overall credit history and the other factors that go into calculating your credit score.