Is it okay to have credit cards you never use?

Is It Okay to Have Credit Cards You Never Use?

In the realm of personal finance, the debate over whether or not it’s beneficial to have unused credit cards often arises. While some argue that maintaining inactive cards can damage your credit score, others suggest that it can actually enhance it.

Impact on Credit History

Unused credit cards generally do not negatively impact your credit score. In fact, keeping them open can have a positive effect. When you have multiple lines of credit available to you, it increases your “credit mix,” a factor that contributes to your overall score. Unused cards also help lower your credit utilization ratio, which is the percentage of available credit that you’re using. A lower utilization ratio indicates to lenders that you’re not overextending yourself financially and makes you appear more creditworthy.

Maintaining Card Activity

However, simply having unused credit cards won’t automatically improve your score. To maintain their activity, it’s recommended to make a small regular purchase on one card and pay it off automatically in full each month. This ensures that the card remains active and contributes to a positive credit profile. Failing to use a card for a prolonged period can result in the issuer closing the account, which can hurt your credit score.

Pros of Unused Credit Cards

• Enhanced credit history: Maintaining unused cards can improve your credit mix and lower your utilization ratio.
• Credit emergencies: Having an unused credit card provides a safety net in case of unforeseen expenses or emergencies.
• No fees: Many credit cards do not charge annual fees, so keeping unused accounts open won’t incur additional costs.

Cons of Unused Credit Cards

• Fraudulent activity: Unused cards could be vulnerable to fraudulent charges if they are compromised.
• Temptation to overspend: Having access to available credit can tempt some people to overspend, which can damage their financial situation.

Conclusion

Whether or not it’s okay to have unused credit cards depends on your individual circumstances. If you’re comfortable managing multiple lines of credit and can resist the temptation to overspend, then maintaining unused cards can be beneficial to your credit history. However, if you’re concerned about potential fraud or simply don’t need the additional credit, it may be best to close any unused accounts. Remember to make an informed decision based on your financial goals and risk tolerance.