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

Should You Keep an Unused Credit Card?

Maintaining a robust credit history is crucial for financial stability. While using credit cards responsibly is the best way to build a positive history, some individuals may wonder if it’s beneficial to keep an unused credit card.

Benefits of Keeping an Unused Credit Card:

• Preserves Credit History: Unused credit cards can preserve your credit history, as they are active accounts that contribute to your credit profile. This is especially helpful if you have a thin credit file or have experienced credit issues in the past.

• Improves Credit Utilization Ratio: Your credit utilization ratio, which is the percentage of your available credit you are using, plays a significant role in your credit score. Keeping an unused credit card helps reduce your overall credit utilization ratio, improving your creditworthiness.

• Easy Reactivation: If you ever need to use the card in the future, you can easily reactivate it by making a small purchase and paying it off promptly.

Considerations for Keeping an Unused Credit Card:

• Fees: Some credit cards may charge annual or maintenance fees, even if you don’t use them. If the fees outweigh the benefits, it may not be worthwhile to keep the card.

• Security: Unused credit cards can increase the risk of identity theft or fraud. Consider freezing the account or setting up fraud alerts to protect yourself.

• Missed Payments: If you forget to make the minimum payment on an unused card, it can negatively affect your credit score. Set up automatic payments or reminders to ensure prompt payment.

Alternatives to Keeping an Unused Credit Card:

If the risks associated with unused credit cards outweigh the benefits, there are alternative ways to maintain a healthy credit history:

• Become an authorized user: Ask a family member or friend with good credit to add you as an authorized user on their credit card. This can help you build credit without using your own card.

• Use a secured credit card: Secured credit cards require you to put down a security deposit, which is used as collateral. This can be a good option for individuals with limited credit history.

Conclusion:

Whether or not to keep an unused credit card depends on your individual circumstances. If you have a thin credit file or need to improve your credit utilization ratio, keeping an unused credit card and making a small recurring purchase can be beneficial. However, it’s important to weigh the potential fees and security risks and consider alternatives if necessary.