Should I close credit cards after paying them off, and how does that affect my credit utilization?

Achieving a $\$0$ balance on a credit card is a huge win for debt freedom, and the immediate urge is to cut up the card and close the account forever. However, this is a financial decision with significant credit score consequences. You’re asking, Should I close credit cards after paying them off, and how does that affect my credit utilization? In most cases, the smartest move for your credit score is to freeze the cards (or put them in a safe place) but keep the accounts open.
Understanding the Mechanism
Closing a credit card has a negative impact on two of the key factors that determine your credit score: your credit utilization ratio and the average age of your credit accounts.
Credit Utilization Ratio (Huge Impact): This is the single biggest reason not to close the card. Your utilization ratio is your total credit card balances divided by your total credit limits. When you close an account, your balance stays the same (zero), but your total available credit drops. This immediately drives your utilization ratio up, which can cause a sudden, sharp drop in your score.
Example: $\$0$ Balance / $\$10,000$ Total Limit $= 0\%$ Utilization. Close a $\$5,000$ card: $\$0$ Balance / $\$5,000$ Total Limit $= 0\%$ Utilization. The problem occurs if you still have balances on other cards.
Average Age of Accounts (Long-Term Impact): Your credit history length accounts for a significant portion of your score. When you close an older card, your average age of accounts drops, which can slowly hurt your score over time, even years later.
Natural Strategies to Try
Instead of closing the accounts, focus on ways to make the card unusable for future debt without compromising your credit score.
The “Drawer” Strategy: Simply put the card in a safe place (like a drawer or safety deposit box) and forget about it. Do not cut it up. Keeping the card open preserves your credit limit and your account age.
The Tiny Charge Tactic: To prevent the issuer from closing the card due to inactivity, use the card once every six months for a very small, recurring expense (e.g., a $\$5$ streaming subscription) and set up an automatic payment to pay the full statement balance immediately.
Call and Downgrade: If the card has a high annual fee, call the issuer and ask to downgrade the account to a no-annual-fee version. This keeps the credit history intact while eliminating the cost.
Lifestyle Tips for Long-Term Credit Health
The zero balance is your victory. Protect the credit score by maintaining the account and using your newly freed-up cash flow.
Monitor for Fees: Ensure the card doesn’t have an annual fee. If it does, you must downgrade or decide if the fee is worth the credit score benefit.
Focus on the Budget: The only way to ensure you don’t run up the balance again is to maintain the same strict budget that helped you pay it off.
Pay in Full: If you do use the card for the tiny charge, pay the statement balance in full before the due date every single time.
Do not close credit cards after paying them off. Keep them open to maintain a low credit utilization and your history length, and protect your credit score. Share your experiences in the comments—how did you resist the urge to close the account?