Is it bad to cancel an unactivated credit card?

Should You Cancel an Unactivated Credit Card?

When it comes to managing your finances, it’s important to make informed decisions that can impact your credit score. One such decision is whether to cancel an unactivated credit card. While it may seem logical to get rid of a card you’re not using, doing so could have unforeseen consequences.

The Impact of Unactivated Credit Cards

Contrary to popular belief, leaving an unactivated credit card open can actually be beneficial for your credit score. Here’s why:

• Credit Utilization Ratio: When you make small, regular charges or bill payments on your credit card, it improves your credit utilization ratio. This ratio measures the amount of credit you’re using compared to your total available credit. Maintaining a low utilization ratio (below 30%) is essential for a healthy credit score. An unactivated card allows you to make minimal charges without increasing your overall credit usage.

Potential Benefits of Keeping an Unactivated Credit Card

• Boosts Credit Score: As mentioned above, an unactivated credit card can help boost your credit score by reducing your utilization ratio.
• Establishes Credit History: Leaving the card open establishes a longer credit history, which is a factor in calculating your credit score.
• Protects Your Identity: If your lost or stolen wallet contains an unactivated credit card, it cannot be used fraudulently.

When to Cancel an Unactivated Credit Card

While it’s generally advisable to keep an unactivated card open, there are some situations where it may be prudent to cancel:

• Annual Fees: If your card has an annual fee, it may not be worth keeping if you’re not using it.
• Fraud Suspicions: If you suspect any unauthorized activity on your card, it’s best to cancel it immediately.
• Credit Limit Concerns: If you have concerns about overspending with your credit card, it may be better to cancel it even if it’s unactivated.

Use Your Unactivated Credit Card Wisely

If you decide to keep your unactivated credit card, use it responsibly to maximize its benefits:

• Set up a recurring small payment, such as a monthly subscription or utility bill.
• Use the card for occasional small purchases, but keep your balance low.
• Monitor your credit report regularly to track the impact on your score.

In conclusion, canceling an unactivated credit card prematurely can be detrimental to your credit score. By keeping the card open and using it wisely, you can reap the benefits of improved credit utilization and establish a longer credit history. However, it’s important to be mindful of potential drawbacks, such as annual fees or fraud risks.