Should You Cancel an Unused Credit Card?

Should You Cancel an Unused Credit Card? I know many users out there have been asking some questions online, and one of them is: Should You Cancel an Unused Credit Card? Now, this has been really something else online and it will be proper if I address it right here on this page.

Should You Cancel an Unused Credit Card?

If you want to know the time for you to cancel a credit card, then you are fully covered and will get all the information you need. All you need to do is to keep on reading this article and you will get everything you came for.

Should You Cancel an Unused Credit Card?

If you are a cardholder that is looking for a card upgrade or you have simply moved on to a new one, you might be wondering what to do with your old card. Your new card is better, so why not just do away with its predecessor?

Cancelling a credit card will simply cause you a direct hit to your credit score, so more often than not, you will want to keep the account open. Correctly managing an open which is rarely used might require some extra attention, but the added effort will also help your credit in the long run.

Conversely, negligence with an open account can even lead to financial turmoil because your credit score might then decrease with card inactivity, so preparing yourself to simply maintain your unused card accounts is a must.

Why You Shouldn’t Cancel Unused Credit Cards

Keeping an old credit account active might seem like a meaningless task, but doing so can easily help to boost your credit score for several reasons. According to FICO’s estimated model, your score is made up of and weighted as follows:

  • Payment history (35 percent): The most important factor of a credit score, your timeliness of payments will be a focus of credit issuers.
  • Credit utilization ratio (30 percent): Typically shown as a percentage, this figure represents the balance of your accounts compared to your total available credit limit.
  • Length of credit history (15 percent): The average age of your credit accounts is the third biggest factor in your score.
  • New credit (10 percent): Applications for credit will appear as inquiries on your credit report, as well as whether accounts have gone delinquent or other activity in the past 3 to 6 months.
  • Credit mix (10 percent): A variety of the different types of credit accounts you have can boost your score.

Maintaining your old credit card account can simply set you up for success in every single one of these categories. By also making small payments every so often to keep the account active, you will simply be balancing your credit utilisation ratio (low activity is better than no activity), maintaining a broad credit mix, and also extending the age of your credit accounts—all good things for your credit score.

On the other hand, an inactive card can simply mean your payment history is hurting. If you then stop using the card altogether, there is also a chance that your account will be closed (typically after at least 12 months of inactivity). This will then appear on your credit report and also drop your score, so it is vital to keep your account active and also make the payments needed to keep your account in good standing.

How Does Canceling an Unused Credit Card Affect Your Credit Score?

Cancelling a credit card can simply impact your credit score, but not straight away. A closed account will then stay on your credit report for a period of up to 10 years. When the closed account then falls off your report, your average age of accounts will likely take a hit, and your total credit limit will also decrease, which will then begin to hurt your credit utilisation ratio.

The general rule for your utilisation is for you to keep it under 30 per cent, but those with excellent credit can simply keep it around 10 per cent or less. Additionally, closing this credit account might even reduce your mix of credit, which is another factor that contributes to your credit score.

In addition to avoiding the toll on your credit score, having an open account with an old card will not take away from the benefits of your new one. Set yourself up for success by simply keeping your credit card active with routine payments to then raise your credit score.

What to Do With Unused Credit Cards

Keeping an active, hands-off credit account can also be a blessing to your credit score if you are able to make the necessary payments.

One easy way for you to simply manage an account is to then set the card up as payment for a recurring monthly expense such as utility bills, subscriptions, or streaming services. By simply setting up automated payments with your issuer to pay off this balance in full each month, you will then improve your credit utilisation ratio, and the average age of your accounts, and also set a trend of on-time, in-full payments.

Putting the card away and also setting reminders to simply spend occasionally can be another way to help boost your score. Make sure to simply enable automated payments to cover the balance each month.

When Should You Cancel an Unused Credit Card?

If you have an unused card and also your credit issuer has sent you a notice that your card is simply going to close due to inactivity, make a payment to keep the account open to give yourself enough time to weigh your options. If your bank has already deactivated the account, you should contact them to see if you can negotiate. If your account was otherwise in good standing, your issuer is likely to be open to the idea of keeping a customer’s account active.

One of the most common reasons for cancelling a credit card is if the card has an annual fee that is no longer worth it. If the yearly fee is not worth the positive impact of keeping an open credit account, then you might want to cancel it. In this case, however, you can also request a product change to a lower-tier card that might then offer similar benefits without the fee—that way you can also keep your account and ditch the extra expense.

Also, if the ease of swiping a credit card sends your spending habits out of control, reevaluate being a cardholder. If your credit card is causing extraordinary financial stress, cut ties with the card.

With no annual fee cards and also most other scenarios, you will be better off keeping your account open and also active. Maintaining the account can then be hands-free and will also help your financial health.

How to Cancel Your Credit Card

Ultimately, the decision is then up to you, but you should be mindful that there are some specific steps to take when you are closing a credit card and some financially savvy tips to consider.

  • Pay off the balance: If you try to cancel a card with a balance, the issuer can simply raise your interest rate to the maximum allowable by law as a penalty for closing the account.
  • Contact the issuer: Call the number on your monthly statement, then confirm that your balance is zero and also notify the representative that you are cancelling the card.
  • Follow up with a letter: The letter should then say that you are closing your account and that you want your credit record to reflect that you have requested the account be closed.

Most people will not keep every card they have ever opened. So, here are a few recommendations for those times when you need to dump a card:

  • Spread out closures over time so that your utilisation does not spike.
  • Keep your oldest account open simply to preserve your length of credit history.
  • Keep cards with high limits open.
  • Do not close credit card accounts right before applying for a loan.


How Many Credit Cards Are Too Many?

Owning more than two or three credit cards can also simply become unmanageable for some people. However, your credit needs and even financial situation are unique, so there is no hard and fast rule about how many credit cards are too many. The important thing is for you to then make sure that you use your credit cards responsibly.

Is It Better To Cancel A Credit Card Or Just Not Use It?

In general, it is best for you to keep unused credit cards open so that you can simply benefit from longer average credit history and a larger amount of available credit. Credit scoring models can then reward you for having long-standing credit accounts and also for using only a small portion of your credit limit.

Why Shouldn’t You Cancel A Credit Card If You Stop Using It?

Cancelling a credit card you do not use can often do more harm than good. You should not close a credit card that has been open for a long time or a card with a high credit limit. Closing the account could even negatively affect your credit history and also your credit utilization, which in turn, lowers your credit score.

Is It Good to Have 2 Credit Cards?

Having more than one credit card might help you keep your credit line utilisation ratio per card lower than the recommended 30% by spreading charges. There are some potential benefits to having multiple cards, such as pairing various types of rewards cards to simply optimise earnings in all categories of spending.


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