In today's digital age, credit cards have become an integral part of our lives. They offer a convenient way to make purchases, pay bills, and even earn rewards. However, with the rise of alternative payment methods like mobile wallets and contactless payments, some people wonder if it is smart to have a credit card they don't use. This article will delve into the pros and cons of having a credit card that you do not frequently utilize.
Firstly, let's consider the benefits of having a credit card. Credit cards offer several advantages, including:
- Building Credit History: One of the primary reasons to have a credit card is to build a good credit history. This can help you qualify for loans, mortgages, and other financial products in the future.
- Rewards Programs: Many credit cards offer rewards programs that can be redeemed for cash back, travel miles, or gift cards. These rewards can add value to your purchases and help offset the cost of the card itself.
- Protection Against Fraud: Credit cards offer fraud protection, which can cover unauthorized charges on your account. Some cards also offer zero-liability protection, meaning you won't be responsible for any fraudulent transactions as long as you report them promptly.
- Convenience: Credit cards are widely accepted at stores, online, and abroad, making them a versatile payment option.
However, there are also drawbacks to having a credit card that you do not use regularly:
- Interest Charges: If you carry a balance on your credit card, you will be charged interest on that balance. Even if you do not use the card, interest will continue to accrue until the balance is paid off.
- Credit Score Impact: Each time a credit card issuer reports your account to the credit bureaus, it can affect your credit score. If you have multiple unused credit cards, this could potentially harm your credit score.
- Potential Overuse: Having multiple credit cards can lead to overuse, which can result in higher debt levels and a negative impact on your credit score.
- Security Risks: Unused credit cards can increase the risk of identity theft if the card details fall into the wrong hands. It is essential to keep track of all your credit card statements and monitor your accounts regularly.
Given these considerations, it is important to evaluate whether having a credit card you do not use is smart. Here are some factors to consider:
- Frequency of Use: If you only use your credit card occasionally, it might not be worth keeping it open. However, if you plan to use it frequently in the future, it may be beneficial to keep it open.
- Credit Card Rewards: If you are enrolled in a rewards program and expect to use the card frequently in the future, it might be worth keeping it open. However, if you do not plan to take advantage of the rewards, it might be better to close the card and focus on one that offers more value to you.
- Credit Score Management: If you have multiple unused credit cards, it might be wise to close those that you do not use. This can help maintain a healthy credit score by reducing the number of credit inquiries reported to the credit bureaus.
- Financial Planning: Consider your overall financial goals and priorities. If maintaining a low credit utilization ratio (the percentage of your total available credit that you use) is important to you, closing unused cards can help achieve this goal.
In conclusion, whether it is smart to have a credit card you do not use depends on various factors such as frequency of use, rewards program participation, credit score management, and financial planning. If you find yourself with multiple unused credit cards, it might be beneficial to review each card's benefits and decide whether to close them based on your personal needs and goals. By being mindful of your credit card usage and managing your credit responsibly, you can ensure that your credit health remains strong and that you are making informed decisions about your financial future.