Is it better to have credit cards and not use them?

Is it Beneficial to Maintain Unused Credit Cards?

In the realm of personal finance, the question of whether to own credit cards that remain unused has sparked debate. Some argue for the advantages of keeping them idle, while others advocate for responsible usage. Let’s delve into the pros and cons of maintaining unused credit cards.

Advantages:

• Extended Credit History: Unused credit cards extend your overall credit history. This is crucial for calculating your credit score, which heavily weighs the length of your credit history.
• Improved Credit Utilization: Unused cards increase your total available credit, lowering your credit utilization ratio. A lower utilization ratio indicates that you’re using a smaller portion of your total credit, which boosts your score.
• Account Activity: Making occasional small purchases or setting up recurring payments on unused cards keeps the accounts active. This prevents them from becoming dormant and potentially closing.

Disadvantages:

• Annual Fees: Some credit cards charge annual fees, which can offset the benefits of having an unused card. Carefully consider these fees and ensure that the potential credit score boost outweighs the cost.
• Temptation for Excess Use: Unused cards can be tempting to use for large purchases or impulse buys. It’s essential to have self-control and avoid overspending.
• Security Risks: Unused cards are vulnerable to fraudulent activity or theft. It’s crucial to monitor your credit report regularly for any suspicious transactions.

Best Practices:

If you decide to maintain unused credit cards, consider the following best practices:

• Use Responsibly: Use the cards infrequently for small purchases or recurring bills, such as online subscriptions.
• Set Reminders: Schedule reminders to make small purchases or payments on a regular basis to ensure account activity.
• Monitor Your Credit: Regularly check your credit report to ensure no fraudulent activity has occurred.
• Consider a Balance Transfer: If you have unused credit with a high-interest card, consider transferring the balance to a card with a lower interest rate. This can save you money on interest payments.

Conclusion:

The decision of whether to have unused credit cards depends on your individual circumstances and financial goals. If you value a longer credit history, improved credit utilization, and the ability to keep accounts active, maintaining unused cards can be beneficial. However, it’s crucial to use them responsibly, be aware of potential fees and security risks, and consider the best practices outlined above.