Is it bad to close a credit card that I never use?

Don’t Toss That Unused Credit Card: Why Keeping It Open Is Good for You

It’s tempting to ditch that credit card you haven’t touched in years. It feels like unnecessary clutter, a reminder of a past purchase you’d rather forget. But before you close that account, consider the surprising benefits of keeping it open, even if you never plan to use it again.

The Power of Credit History: Your credit history is like a financial resume. Lenders look at it to gauge your trustworthiness and ability to manage debt. Every open credit account, even if you don’t use it, contributes to your credit history length, which is a significant factor in your credit score. Closing an account, even one you rarely use, can shorten your credit history and potentially lower your score.

Credit Utilization Ratio: A Lower Number Is Better: Your credit utilization ratio reflects the amount of credit you’re using compared to your total available credit. Ideally, you want to keep this ratio low. Closing a credit card can actually increase your utilization ratio, making it look like you’re using more of your available credit than you are.

Why Keeping It Open Doesn’t Hurt: You might be worried about annual fees, but many cards offer options like waiving fees if you maintain a certain balance or meet spending requirements. Even if you have to pay a small annual fee, it’s often worth it to protect your credit score.

The Exception: There are some cases where closing an unused credit card might be a good idea. If you’re facing a high annual fee that you’re not willing to pay, or if the card has a limited credit limit that is affecting your overall utilization ratio, closing it could be beneficial.

In Conclusion: While a dormant credit card might seem useless, keeping it open offers a surprisingly powerful benefit: a stronger credit history and a healthier credit utilization ratio. Before you close that account, weigh the advantages and disadvantages carefully. You might find that the benefits of keeping it open far outweigh the cost of a slightly thicker wallet.