Is it good to keep a credit card without using it?

Advantages of Keeping Unused Credit Cards

While it may seem counterintuitive, maintaining unused credit cards can provide significant financial benefits. Here’s why:

Extended Credit History:

• Each credit card account contributes to your credit history, regardless of usage.
• Lengthier credit history is a positive factor in credit scoring models.
• Unused cards can help you establish a long credit history and build a more favorable credit profile.

Lower Credit Utilization Ratio:

• Credit utilization ratio measures the amount of available credit you’re using compared to your total credit limits.
• Keeping unused credit cards open increases your total credit limits.
• This lowers your credit utilization ratio, which is another important factor in determining credit scores.

Higher Credit Scores:

• Longer credit history and lower credit utilization ratio contribute to higher credit scores.
• Higher credit scores can qualify you for lower interest rates on loans, mortgages, and credit cards.

Reduced Temptation:

• Keeping unused credit cards out of your wallet or easy reach reduces the temptation to overspend.
• This can help you maintain financial discipline and avoid unnecessary debt.

Benefits for Closed Accounts:

• Even closed credit cards can remain on your credit report for several years.
• They continue to contribute to your credit history, although their impact may diminish over time.
• Keeping closed accounts open until they fall off your credit report can help maintain a positive credit image.

Drawbacks to Consider:

• Annual Fees: Some credit cards have annual fees that you may have to pay even if you don’t use the card.
• Dormancy Fees: Inactivity on certain cards can trigger dormancy fees.
• Risk of Fraud: Unused cards are less likely to be monitored for fraudulent activity.

Conclusion:

Maintaining unused credit cards can offer significant advantages for your credit health. The benefits of longer credit history, lower credit utilization ratio, and higher credit scores can outweigh the potential drawbacks. However, it’s crucial to be aware of any associated fees and to ensure that your unused cards are protected against fraud. By carefully managing your unused credit cards, you can enhance your overall financial standing.