credit & debt

Merging Credit Card Accounts

Before you close your individual accounts and switch to a single joint card, understand the potential impact on your credit score.

I recently married, and my husband and I are setting up our financial accounts. We’re thinking about switching to a joint credit card to simplify our finances, but we are concerned that canceling our old credit cards will negatively affect our credit. Would it be better to keep our individual cards open or to close them?

Congratulations to you and your husband! You are on the right track. Even though it might simplify your finances to have one joint card between the two of you, closing old cards can hurt your credit score. It would be better to open a third joint credit card account rather than cancel your existing accounts.

Having fewer cards typically boosts your credit utilization ratio, which is the amount of available credit that you have used. Your utilization ratio can have a surprisingly big impact on your credit score -- it’s one of the largest parts of the “amount of credit used” category, which can account for nearly one-third of your score. For example, if you have two credit cards in your name with a $25,000 limit on each one and you’ve charged a total of $5,000 between them, you’ll have a credit utilization ratio of 10%. If you close one card and have a single credit limit of $25,000, your utilization ratio will double, to 20%.

John Ulzheimer, credit expert at CreditSesame.com, recommends keeping your utilization ratio as low as possible -- especially before you apply for a mortgage. In fact, it’s a good idea to keep your utilization ratio at 10% or less for three to six months before applying for a home loan.

Also, closing old accounts doesn’t erase them from your credit report; they will stay on your report for up to 10 years. “Having a long and successful credit history makes you look very good to potential lenders. So unless there is a good reason to close them, I suggest keeping the accounts open,” says Beverly Harzog, author of Confessions of a Credit Junkie. However, you may eventually want to close credit cards that charge a big annual fee, unless you’re getting rebates or other rewards that make the fee worthwhile. See Close a Credit Card Account to Avoid Fees? for more information.

If you are thinking about adding your spouse to your current account as an authorized user, note that the authorized user will have the same credit reporting on that card that the primary cardholder does, says Ulzheimer. “That means they’ll get the benefit of the card’s age, its low balance, its clean credit history, everything associated with the account. The flip side is true as well: Any negative aspects of the account will show up on the authorized user’s credit reports.”

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