How Long Should You Wait to Close a Credit Card After Opening It and Receiving Rewards?

When you open a new credit card and receive rewards, there's an optimal timeline to wait before closing the card. This timeline ensures you have enough time to redeem the rewards without incurring any penalties. In this article, we'll explore the factors you should consider and provide guidance on how long to wait before closing your credit card.

Understanding the Process

When you receive rewards from a new credit card, it's important to understand the timing involved in redeeming these rewards. Many credit card issuers have specific conditions for claiming and redeeming these rewards, and these conditions can vary depending on the credit card product you're using. Commonly, these rewards might be tied to spending thresholds and other requirements.

Once you've met these conditions, you generally have a short window to redeem the rewards. Therefore, it's crucial to wait until you can fully take advantage of these rewards before considering closing the card. This process ensures that you don't miss out on any value you've earned.

Impact on Your Credit Score

One of the common concerns when closing a credit card is the potential impact on your credit score. It's a widely held belief that closing a credit card can lower your credit score, but this is not entirely accurate. Here’s what you need to know:

1. Credit Score Impact of a Closed Credit Card

When you close a credit card, the account remains on your credit report for a period of 10 years. This long-term presence can actually be beneficial, as it shows a broader and more comprehensive credit history. During this time, the account remains a part of your credit utilization ratio, which can positively affect your credit score if you maintain a low balance.

Therefore, the primary impact on your credit score comes from two main factors:

Revolving Credit Debt: If you have any outstanding credit card debt, closing the card can lower your available credit, which can increase your utilization rate. This higher utilization rate can negatively impact your credit score. Hard Inquiries: If you frequently apply for new credit cards, the hard inquiries can negatively affect your score. However, if you wait the recommended time between applications, these inquiries will have less impact as they age out.

It's important to note that closing a credit card when you have no outstanding debt can generally be done without significant impact on your credit score.

Recommended Waiting Period

The recommended waiting period to close a credit card after opening it and receiving rewards can vary. Typically, you should wait a minimum of 18 to 24 months after opening the card to ensure you have time to:

Redeem any rewards you've earned. Pay off any associated balances. Evaluate if the card still serves a useful purpose in your financial strategies.

During this period, you can monitor your credit utilization and ensure that closing the account does not negatively impact your financial health.

Final Thoughts

While the process of opening a new credit card and receiving rewards is exciting, it's crucial to consider the strategic implications of closing the card. By waiting the recommended period, you can maximize the value of your rewards and avoid any unnecessary financial repercussions.

Remember, your credit score and financial health are long-term investments. Make informed decisions that align with your overall financial goals and objectives.