Credit cards are a ubiquitous part of modern life, offering convenience and rewards for cardholders. However, with the rise of digital banking and other payment methods, many people find themselves with multiple credit cards that they no longer use. This raises the question: is it better to let a credit card expire or close it? In this article, we will delve into the pros and cons of both options and provide guidance on how to make an informed decision based on your individual circumstances.
Firstly, let's understand what happens when a credit card expires. When a credit card expires, it means that the card cannot be used to make transactions after its expiration date. The expiration date is typically listed on the front of the card and is usually set to coincide with the start of a new billing cycle. After the expiration date, the card can still be used for cash advances, balance transfers, and payments made before the expiration date. However, any new purchases or balance transfers will require a new card to be issued.
Closing a credit card, on the other hand, involves permanently cancelling the card and removing it from your account. This means that you will no longer have access to the card and any associated benefits, such as rewards points or insurance coverage. Closing a card also means that you will no longer receive statements or notifications related to that card. Additionally, if you have a balance on the card, you may need to pay it off before closing the card.
Now, let's examine the pros and cons of letting a credit card expire versus closing it:
Letting a Credit Card Expire:
Pros:
- No additional fees: There are no fees associated with letting a credit card expire.
- No impact on credit score: Letting a card expire does not affect your credit score.
- No need to pay off balance: If you have a balance on the card, you do not need to worry about paying it off before the card expires.
Cons:
- Lost benefits: You lose any rewards or perks associated with the card upon expiration.
- Potential fraud risk: If someone else obtains your expired card number, they could potentially use it for fraudulent activities.
- Difficulty in obtaining replacement: If you need a replacement card, you may face additional costs and delays in obtaining a new one.
Closing a Credit Card:
Pros:
- Eliminates clutter: Closing unused cards helps reduce the number of cards you carry and manage.
- Reduces potential fraud: By eliminating unused cards, you reduce the risk of unauthorized use.
- Improved credit score: If you have high-interest rates on closed cards, it can help lower your overall debt ratio and improve your credit score.
Cons:
- Fees: Some issuers charge fees for closing a card, which can range from $5 to $30 or more.
- Need to pay off balance: If you have a balance on the card, you must pay it off before closing the card to avoid penalties.
- Lost benefits: Closing a card also means losing any rewards or perks associated with it.
When deciding whether to let a credit card expire or close it, consider the following factors:
- Frequency of use: If you rarely use the card and don't plan to in the future, it might be better to close it.
- Rewards and benefits: If the card offers significant rewards or benefits, you might want to keep it open even if you don't use it frequently.
- Security concerns: If you have concerns about the security of your personal information, closing unused cards can reduce the risk of fraud.
- Credit score considerations: If you have high-interest rates on the card and want to improve your credit score, closing it can help.
In conclusion, whether to let a credit card expire or close it depends on your individual circumstances and preferences. If you have a card that you rarely use and don't plan to use in the future, closing it might be the best option. On the other hand, if you value the rewards or benefits offered by the card, you might choose to keep it open even if you don't use it frequently. Ultimately, the key is to make informed decisions based on your financial goals and priorities.