Is it worth keeping credit cards you don t use?

Is It Beneficial to Maintain Unused Credit Cards?

In the realm of personal finance, the value of unused credit cards has long been a topic of debate. While some argue that they serve no purpose and should be discarded, others claim that they can actually benefit your credit health. Let’s explore the pros and cons of keeping unused credit cards.

Benefits of Retaining Unused Credit Cards:

• Improved Credit History: Credit cards, even unused ones, contribute to your credit history. Keeping these cards open lengthens your credit history, which is a significant factor in determining your credit score.
• Lower Credit Utilization: Credit utilization refers to the amount of credit you are using relative to your available credit limit. Unused credit cards increase your total credit limit, which in turn lowers your credit utilization. This is another important factor that influences your credit score.
• Emergency Backup: Unused credit cards can provide a convenient backup in case of emergencies, such as unexpected expenses or a temporary loss of income.

Potential Drawbacks:

• Annual Fees: Some credit cards charge annual fees, even if you don’t use them. If the annual fee outweighs the potential benefits, it may not be worth keeping the card open.
• Security Risks: Unused credit cards are susceptible to fraud if they fall into the wrong hands. It’s important to monitor your credit report regularly and freeze your credit if necessary.
• Tempted to Overspend: Unused credit cards can be tempting to use unnecessarily, especially if you have a low balance. This can lead to debt and damage your credit score.

Maximizing the Benefits of Unused Credit Cards:

To reap the benefits of unused credit cards while mitigating the risks, consider the following strategies:

• Use Them Occasionally: Activate unused credit cards for recurring bills or small purchases. This shows activity on the account and keeps it from becoming dormant.
• Set a Budget: If you choose to use unused credit cards, establish a budget and track your spending to avoid overspending.
• Monitor Your Credit: Regularly check your credit report to ensure that there is no fraudulent activity on your unused credit cards.

Conclusion:

Whether or not it is worth keeping unused credit cards depends on individual circumstances and financial goals. If you value your credit health and want to keep your credit utilization low, it can be beneficial to retain unused credit cards. However, it’s crucial to monitor your credit regularly and avoid using them unnecessarily. By following these guidelines, you can harness the benefits of unused credit cards without compromising your financial well-being.