Is it best to get rid of unused credit cards?

Maintaining Unused Credit Cards: A Smart Financial Move

In the realm of personal finance, individuals often face the dilemma of whether to discard unused credit cards. While some advocate for eliminating them altogether, others emphasize the benefits of retaining them. This article delves into the advantages of maintaining unused credit cards and explains why it's generally advisable to keep them active.

Advantages of Keeping Unused Credit Cards

There are several compelling reasons why it's often wise to avoid closing unused credit cards:

• Lengthen Credit History: Keeping unused credit cards open contributes to building a longer credit history. Credit scoring models heavily consider the duration of credit accounts, and a longer history can boost your overall credit score.

• Reduce Credit Utilization: When you have multiple active credit cards, even if you don't use them regularly, your overall credit utilization ratio decreases. This ratio measures the amount of credit you're using relative to your total available credit. A lower utilization ratio signifies responsible credit management and can improve your credit score.

• Convenience for Emergencies: Unused credit cards provide a readily available source of funds in case of unexpected expenses or emergencies. If you need to make a large purchase or cover unexpected costs, having an active credit card can be extremely helpful.

How to Keep Unused Credit Cards Active

Maintaining unused credit cards doesn't require frequent use. To keep them active and avoid inactivity fees, you can:

• Make Small Transactions: Occasionally make small purchases, such as a cup of coffee or a gift card, to keep the account active. Even infrequent transactions will prevent the card from being closed due to inactivity.

• Set Up Automatic Payments: Establish automatic payments for a recurring monthly expense, such as a small charity donation or a subscription service. This ensures the card gets used regularly without requiring you to remember to make purchases.

• Call the Credit Card Company: If you're concerned about maintaining unused cards, contact the respective credit card companies. They may be willing to waive inactivity fees or suggest alternative ways to keep the accounts open.

Conclusion

Keeping unused credit cards active can be a valuable financial strategy. It helps you build a longer credit history, reduce your credit utilization ratio, and provides a convenient source of funds for emergencies. By making small transactions or setting up automatic payments, you can keep these cards active without the need for frequent use. Therefore, it's generally advisable to maintain unused credit cards unless there are compelling reasons to close them.