In today's digital age, credit cards have become an integral part of our lives. They offer a convenient way to make purchases, earn rewards, and even build credit history. However, with the rise of alternative payment methods like mobile wallets and contactless payments, some people wonder if they should keep a credit card if they don't use it frequently. In this article, we will delve into the pros and cons of keeping a credit card that you do not use often and provide guidance on whether or not to cancel it.
Firstly, let's consider the benefits of having a credit card. Credit cards offer several advantages, including:
- Emergency funds: A credit card can serve as a source of emergency funds in case of unexpected expenses or financial emergencies.
- Rewards programs: Many credit cards offer rewards programs that can be valuable for frequent travelers or big spenders. These rewards can include cash back, points that can be redeemed for travel, merchandise, or statement credits.
- Building credit history: Using a credit card responsibly can help build a good credit score, which is essential for securing loans, mortgages, and other forms of credit in the future.
- Protection against fraud: Credit cards offer fraud protection, which can cover unauthorized charges made on your account.
However, there are also drawbacks to having a credit card that you do not use frequently:
- Interest charges: If you carry a balance on your credit card, you may incur interest charges, which can add up over time if you do not pay off the balance in full each month.
- Credit utilization ratio: The credit utilization ratio is the amount of your available credit that you use. If you do not use your credit card frequently, your ratio may be low, which could negatively impact your credit score.
- Potential fees: Some credit cards charge annual fees, late payment fees, or foreign transaction fees, which can add up if you do not use the card regularly.
- Security concerns: Unused credit cards can increase the risk of identity theft if the card details fall into the wrong hands.
Given these considerations, the decision to keep or cancel a credit card depends on your personal circumstances and usage habits. Here are some factors to consider when deciding whether to keep or cancel your unused credit card:
- Frequency of usage: If you only use your credit card occasionally, it might be more cost-effective to cancel the card and opt for a different payment method when needed.
- Credit utilization ratio: If your credit utilization ratio is low due to infrequent usage, it might be beneficial to keep the card to maintain a higher ratio and potentially improve your credit score.
- Rewards program: If you have a rewards program that you actively participate in, it might be worth keeping the card even if you do not use it frequently.
- Financial goals: Consider your long-term financial goals. If building credit history is important to you, it might be better to keep the card despite its infrequent usage.
To cancel your unused credit card, follow these steps:
- Contact your credit card issuer: Reach out to your credit card company to request the cancellation of your card. You can usually do this by calling their customer service number or visiting their website.
- Confirm cancellation: Once you have requested cancellation, confirm the process with the representative from your credit card company. They will guide you through the cancellation process and answer any questions you may have.
- Update your records: After cancelling your credit card, update your records to reflect the change. This includes removing the card information from your wallet, online accounts, and any automatic payments you may have set up.
In conclusion, whether or not to keep a credit card if you do not use it frequently depends on your individual circumstances and preferences. If you find that the card is costing you money in terms of interest charges or fees, and you do not derive significant value from its rewards program, it might be wise to cancel it. However, if maintaining a high credit utilization ratio or participating in a valuable rewards program is important to you, keeping the card might be the better option. Always weigh the pros and cons before making a decision and ensure that you are making informed choices that align with your financial goals.