Should I get rid of a credit card I don't use?

Should You Discard an Inactive Credit Card?

If you possess a credit card that you seldom or never use, you may wonder if it’s wise to close it. While this decision depends on your individual financial situation, consider the following factors:

Impact on Credit Utilization Ratio

Keeping an inactive credit card open can slightly increase your credit utilization ratio, which is the percentage of available credit you’re utilizing. This metric accounts for 30% of your FICO score, so a higher ratio can negatively impact your score. However, if you have several other active credit cards with low balances, the impact of an unused card will be minimal.

Closing and Credit Utilization

Closing an unused credit card can potentially lower your credit limit, which could elevate your credit utilization ratio. This is because your credit utilization is calculated as the sum of your credit card balances divided by your total available credit. By reducing your available credit, closing a card could increase your ratio.

Pros of Keeping an Unused Credit Card

• Long Credit History: Keeping an unused credit card open can help you maintain a longer credit history, which is a positive factor in determining your credit score.
• Emergency Backup: An inactive credit card can serve as a backup in case of financial emergencies or unexpected expenses.

Cons of Keeping an Unused Credit Card

• Annual Fees: Some credit cards charge annual fees, which can become a needless expense for unused cards.
• Security Risk: Unused credit cards may be vulnerable to fraud or hacking if they’re compromised.
• Temptation: Having an unused credit card readily available could tempt you to overspend or carry a balance.

Weighing the Decision

Ultimately, the decision of whether to keep or close an unused credit card depends on your specific circumstances. If your credit utilization ratio is already high or you’re concerned about security risks, closing the card may be beneficial. On the other hand, if you have a long credit history or want a backup card for emergencies, keeping the card open might be the wiser choice.

Consider carefully the potential impact on your credit score and financial well-being before making a decision. If you do decide to close the card, notify the credit card issuer in writing and shred the card to prevent unauthorized use.