Is it worth keeping a credit card you don't use?

Is It Beneficial to Retain Unused Credit Cards?

In the realm of personal finance, the question of whether to keep unused credit cards lingers in the minds of many individuals. While some advocate for their closure, others recognize the potential benefits of maintaining them. This article aims to shed light on the merits of retaining unused credit cards to guide your financial decision-making.

Strengthening Credit History

One compelling reason to keep an unused credit card is its positive impact on your credit history. When you maintain a credit card account in good standing, it contributes to the length of your credit history, which is a significant factor in calculating your credit score. The longer your credit history, the more favorable it appears to lenders, as it demonstrates your responsible credit management over time.

Lower Credit Utilization

Credit utilization, which refers to the percentage of your available credit that you’re using, is another important aspect of your credit score. By keeping an unused credit card, you effectively increase your total available credit limit. This reduces your credit utilization ratio, making it appear as though you’re using less of your available credit, which is a positive indicator for lenders.

Maximizing Available Credit

Having unused credit cards can be advantageous in situations where you need to finance large purchases or emergencies. By spreading your expenses across multiple credit cards, you can avoid maxing out any one account and maintain a favorable credit utilization ratio. This flexibility provides a financial cushion and ensures that you have access to credit when you need it most.

Maintaining Activity

While it’s not advisable to use unused credit cards frequently, it’s wise to activate them periodically with small purchases or recurring payments. This keeps them in good standing and prevents them from being closed by the issuer due to inactivity. Regular activity shows lenders that you’re responsible with your credit and that the cards are still active.

Conclusion

In conclusion, there are several benefits to retaining unused credit cards, including strengthening your credit history, lowering credit utilization, maximizing available credit, and maintaining card activity. While it’s important to avoid carrying a balance or paying unnecessary fees, keeping unused credit cards in good standing can have a positive impact on your financial profile. By carefully managing your unused credit cards, you can harness their benefits and enhance your overall creditworthiness.