Can I keep a credit card without using it?

Maintaining an Unused Credit Card: A Creditworthiness Advantage

In the realm of personal finance, maintaining a positive credit score is crucial for financial stability. One aspect that contributes significantly to this score is the length and activity of credit accounts. While it’s generally advisable to use credit cards responsibly, there are instances when keeping an unused credit card can be advantageous for your creditworthiness.

Benefits of Maintaining an Unused Credit Card

Having an unused credit card, particularly one with a long history, can positively impact your creditworthiness in several ways:

• Established Credit History: Lenders value established credit accounts, as they demonstrate responsible credit management over time. By keeping an unused credit card open, you are maintaining this valuable aspect of your credit history.

• Improved Credit Utilization Ratio: Your credit utilization ratio is another significant factor in your credit score. Keeping an unused credit card with a high limit can lower your overall utilization ratio, which is viewed positively by lenders.

• Credit Age: The age of your credit accounts is also taken into consideration by credit bureaus. An unused credit card with a long history contributes to increasing the average age of your credit accounts, boosting your score.

When to Keep an Unused Credit Card

Not all unused credit cards are worth keeping. It’s important to consider the following factors before deciding to retain an unused card:

• Annual Fee: Some credit cards charge an annual fee for maintaining an account. It’s wise to avoid keeping cards with high annual fees unless they offer significant benefits.

• Interest Charges: If you plan to maintain an unused credit card with a balance, be aware of potential interest charges. Staying current on payments or paying off the balance in full can prevent interest from accumulating.

• Need for Credit: Keeping an unused credit card may not be necessary if you have other active accounts with sufficient credit limits. Assess your credit needs and determine if you require an additional unused card.

Consequences of Closing an Unused Credit Card

Closing an unused credit card can have negative consequences on your creditworthiness, such as:

• Shortened Credit History: Closing an older credit account can shorten the average age of your credit accounts, potentially lowering your score.

• Increased Credit Utilization Ratio: If you close a credit card with a high limit, your credit utilization ratio may increase, negatively impacting your score.

• Damage to Credit Mix: Credit bureaus prefer a mix of different types of credit accounts. Closing an unused credit card can reduce your credit mix and lower your score.

Conclusion

Maintaining an unused credit card can be a strategic move to enhance your creditworthiness. By retaining established credit accounts, lowering your credit utilization ratio, and contributing to your credit age, you can improve your overall credit score. However, it’s essential to carefully consider the costs and benefits associated with keeping an unused credit card to make an informed decision that aligns with your individual financial goals.