Should I keep a credit card I don't use?

Should You Keep a Credit Card You Don’t Use?

In the realm of personal finance, credit cards often play a crucial role in building and maintaining a strong financial profile. However, the question arises: should you keep a credit card that you no longer actively use? Here’s a comprehensive analysis to help you make an informed decision.

Benefits of Keeping Unused Credit Cards:

• Robust Credit History: Keeping unused credit cards open contributes to the length of your credit history, which is a significant factor in calculating your credit score. A longer credit history indicates financial stability and reliability.

• Low Credit Utilization: Credit utilization, or the amount of credit you use compared to your total available credit, is another crucial factor in your credit score. Keeping unused credit cards open increases your overall credit limit, thereby reducing your credit utilization ratio. A lower credit utilization ratio suggests that you are not overextending your credit and using your credit wisely.

Strategies for Maintaining Activity:

Although you may not actively use your unused credit cards, it is important to maintain some activity on them to avoid them becoming dormant or inactive. Here are some strategies to consider:

• Occasional Purchases: Make small purchases occasionally with your unused cards. This can be as simple as buying a coffee or paying a utility bill.

• Recurring Bills: Set up one or two recurring bills to be paid automatically from your unused credit card. This ensures that the card stays active even if you forget to use it.

Drawbacks of Keeping Unused Credit Cards:

• Annual Fees: Some credit cards charge annual fees, which can be a financial burden if you are not using the card. Check the terms and conditions of your card to see if there are any fees associated with keeping it open.

• Security Risks: Unused credit cards can pose a security risk if they are lost or stolen. Make sure to keep your unused cards in a safe place and monitor your credit reports regularly for any unauthorized activity.

Decision-making Process:

The decision of whether or not to keep an unused credit card depends on your individual circumstances. If you are aiming to build or maintain a robust credit history and low credit utilization, keeping unused credit cards open can be beneficial. However, if you are concerned about annual fees or security risks, it may be wise to close your unused cards.

In Conclusion:

Keeping unused credit cards open can provide certain advantages for your credit profile. However, it is important to weigh these benefits against the potential drawbacks. By employing strategies to maintain activity on your unused cards while considering the associated risks, you can make an informed decision that aligns with your financial goals.