Depending on who you speak to, closing credit cards can be both a good and bad idea. After all, we understand why some Canadians choose to do away with their cards after repaying a maxed out balance.

There are a lot of negative feelings attached to that maxed out balance. It might have taken you a long time to repay it and while repaying it, you realized just how high the interest rates were and what little value you got when you calculate the true cost.

Closing credit cards is also a symbol of telling yourself you will never fall into the same trap again. It’s a rejection of ever being in that situation of struggling to meet those obligations and laying a large debt to rest.

As good as it may feel to burn that bridge once you’ve gotten out of a long repayment cycle, in the end closing credit cards is not the best idea…with one exception.

When Closing Credit Cards Is A Good Idea

There are five factors for credit score health and one of them is limiting some of the types of credit you have if you’ve got several sources.

Lenders like seeing borrowers with a healthy credit score who keep their borrowing sources to a limit. They don’t like seeing a situation where a borrower could potentially draw from several sources and suddenly create a debt they can’t manage.

This is the only situation when closing credit cards is wise.

When Closing Credit Cards Is A Bad Idea

The first reason doing away with your card after repaying the balance is…you just repaid a debt. That looks very good in the eyes of lenders and closing that credit card will eventually erase that good financial behavior.

Reason number two why closing credit cards is not a great idea is lenders want to see that you have existing sources of credit. It’s reassuring for them to see you’ve got pre-established relationships and that other lenders trust you.

Now that you’ve gotten out of repaying your balance, this is your chance to avoid the trap of maxing out your credit again and benefiting from responsible debt management in a calculated way.

Example: paying your utility bills, phone bills and all in a timely manner is great for your credit score.

Why not aim for a double-whammy of good behavior? Have your payments automatically paid with your credit card (good credit karma), then immediately repay the charges that were incurred on your card (a second dose of good credit karma).

The key to is to not let your emotions get in the way when it comes to money. Now that you’ve repaid your balance, closing credit cards would erase the hard work you put into getting your debt out of the way.

Keep your credit cards, not only for having a source of credit history and pre-existing credit worthiness, but keep them as a prize for winning the debt game.