Is it bad for your credit to have a credit card you never use?

Is It Bad to Have a Credit Card You Never Use?

When managing your credit, it’s important to be mindful of the potential impact on your credit score. Many people wonder if it’s detrimental to have a credit card that they seldom or never use. Here’s an in-depth look at how dormant credit cards can affect your credit.

Impact on Credit Utilization

Credit utilization is the amount of credit you’re using compared to the total credit available to you. High credit utilization can lower your score, while keeping it low can be beneficial. If you have a credit card that you never use, your credit utilization will remain high because the unused credit line is still counted against you. This can potentially harm your score.

Account Closure Risks

Credit card issuers may close inactive accounts after a period of inactivity. Typically, this happens after a year or two of non-use. When an account is closed, it can negatively impact your credit score in two ways:

• Reduced Available Credit: Closing an account reduces the total amount of credit available to you. This can increase your credit utilization ratio, as mentioned above.
• Shortened Credit History: The length of your credit history is a significant factor in determining your score. Closing an old account can shorten your average account age, which can also lower your score.

Benefits of Keeping Dormant Cards Open

Despite these potential drawbacks, there are also some benefits to keeping a dormant credit card open:

• Emergency Backup: Having an unused credit card can provide a financial cushion for unexpected expenses.
• Preserving Credit History: Keeping a dormant card open preserves your credit history, even if you’re not actively using it. This can be especially beneficial if you apply for credit in the future.

Recommendation

In general, it’s advisable to keep an infrequently used credit card open if you can. By maintaining an active account, you can preserve your credit history, reduce your overall credit utilization, and have a backup payment option in case of emergencies.

However, if you’re concerned about the risks associated with dormant cards, such as account closure or high credit utilization, you may want to consider closing the card or using it sparingly for small purchases to keep it active. Ultimately, the best decision for you will depend on your individual circumstances and financial goals.