Credit card fees

[52cents]

My wife and I have BOA Alaska Airlines Credit card with a zero balance and a $19k limit. My wife signed up for it way way before we even met and it charges us a $45 annual fee. This drives me crazy.
I've tried to get it waived, sometimes it works, sometimes it doesn't.  I'd love to get rid of it but I'm worried that it will mess up our credit score. It is our oldest credit card by about a decade and our credit score is excellent (last time I checked).

Should we ditch it or keep it?
Thanks for any advice.

[simonsez]

Ignoring credit scores and interest rates on loans for a second, how does this credit card benefit you?  Does it have frequent flyer miles or cash back or rewards points?  If it does, and it sounds like you have had it for awhile, try to assign $ values to the reward benefits that you receive and look back over the history of the card and see if that average yearly reward $ amount is close to $45 or not.  If it is, then obviously you're not losing out too bad and can keep it since benefit >= cost.  If the amount is well under $45 or you don't even have any type of benefit other than for the sake of your credit score, then I'd say ditch it (unless you are financing something in the NEAR future).  Even if you are going to get a mortgage in the future, the ding will surely have recovered by then if you have other credit lines open and your credit is already excellent now.

Having the best credit score possible is neat but if you don't need to utilize the good score now (and you aren't getting benefits), then essentially you are paying for vanity.  Keep in mind most of the lowest rates are already offered to 760+ or even 720+.  e.g. if you are at 800 now and cancelling would put you at 795 next month, it likely wouldn't change anything.

[madage]

Do you "need" your credit score for any upcoming (next 2-3 months) loans (since you're here, the only loan you might be considering should be a mortgage)? How do you define excellent? A score above 740 is generally high enough to get the best rates and get approved for the "best" rewards credit cards (if you're inclined). Have you tried calling the provider to see if you can move to a different, fee-free card that should keep the account history on your credit report (and thus maintain your current score).

In general, I find the hand-wringing over credit scores to be pretty silly. It's just not that big of a deal, and any hit caused by opening or closing accounts will be recovered within a few months of (continued) responsible use of credit.

[52cents]

It doesn't benefit us at all. My wife moved from Alaska many years ago and we use a different credit card solely for the cash back that goes straight to the mortgage every month.
We are planning on applying for a HELOC on our primary residence in 6 months time, so I'm wondering if the credit will have recovered by then.

Thank you so much for the very informative and helpful reply simonsez

[chicagomeg]

Whoa, hold on. I don't think it's true that this won't affect your credit or that the effect will be minimal after a few months. Average account age is a pretty big factor in your credit score. I would at least wait until you do the HELOC to close it. Can you estimate what your average account age will be without this card? Credit Karma actually lets you model your credit score based on specific changes, that should at least give you an idea of the magnitude of the effect.

[52cents]

Have you tried calling the provider to see if you can move to a different, fee-free card that should keep the account history on your credit report (and thus maintain your current score).

I didn't know that this could be a possibility, thanks for the advice, I'll give it a try.

[madage]

Credit Karma actually lets you model your credit score based on specific changes, that should at least give you an idea of the magnitude of the effect.

Good call, mlipps. Running this change through Credit Karma is a good idea. I just tried it with my info and my estimated score (excellent) didn't budge until I added a new inquiry and a new card with a $10,000 limit. It dropped 3 points. My old card, however, is only 5-6 years older than my next oldest, so the drop when removing an account that's 10 years older might be more significant depending on the average account age with and without.

[RewardTraveler]

There have been a lot of good suggestions so far and calling to see if they can downgrade it to a no fee card is probably the best answer.

With that being said, the impact it has on your credit depends on your personal situation.  The record of the credit card will stay on your credit report for 10 years, which means it will still count as your oldest credit line for the next 10 years even if it is closed.  For the next 3 months, it is a non-factor.

Where you will notice an impact is on your available credit.  Let's say your other card has a $5k limit and you spend $1k on it each month.  As far as creditors are concerned you're using $1k/$24k available ($5k + $19k), 4%.  Now if you cancel the card your total available credit will fall to $5k and your credit utilization will increase to 20% ($1k/$5k).

If you decide to open a new card to replace the closed one (downgrading to a fee free card wouldn't fall into this category), you will see your credit utilization improve, but your Average Age of Accounts will fall (a new card with 0 years will be reported).

[madage]

The record of the credit card will stay on your credit report for 10 years, which means it will still count as your oldest credit line for the next 10 years even if it is closed. 

I did not know that. Thanks!

[simonsez]

....Where you will notice an impact is on your available credit....         ......available credit will fall .......and your credit utilization will increase.

Good point.  I glossed over that detail a bit with talks about cancelling a card with 19k limit on a forum where a main tenet is to consume less (meaning I assumed it wouldn't affect utilization too much).  :)

The calling in is a great idea.  Can't hurt.