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 scores. However, with the rise of online shopping and contactless payments, many people find themselves with unused credit cards in their wallets. The question on everyone's mind is: Is it best to get rid of unused credit cards?
The answer to this question depends on various factors such as the number of unused credit cards, the credit limit on each card, the interest rates, and the potential benefits of holding onto them. In this article, we will delve into the pros and cons of keeping and canceling unused credit cards to help you make an informed decision.
Benefits of Keeping Unused Credit Cards
Firstly, let's consider the advantages of keeping unused credit cards. One of the primary reasons people hold onto unused credit cards is for emergencies. Having a backup credit card can be beneficial in case one card gets lost, stolen, or experiences fraudulent activity. Additionally, some credit cards offer extended warranty coverage on purchases, which can be useful if you ever need to make an expensive purchase.
Another reason to keep unused credit cards is for rewards programs. Many credit card issuers offer sign-up bonuses, cashback, points, or miles that can add up over time. By maintaining these cards, you can continue to earn rewards without having to open new accounts or spend additional money.
Lastly, some credit cards come with perks like travel insurance, price protection, or zero liability protection. These benefits can be valuable in specific situations, making it worth keeping the card even if you don't use it frequently.
Drawbacks of Keeping Unused Credit Cards
Despite the benefits, there are also downsides to keeping unused credit cards. The most obvious drawback is the risk of fraud. If your credit card information falls into the wrong hands, it could lead to unauthorized charges or identity theft. This risk is heightened if you have not used the card in a long time and have forgotten about it.
Another disadvantage is the impact on your credit score. Each credit card you hold contributes to your credit utilization ratio, which is the percentage of your available credit that you use. If you have multiple unused credit cards, they could lower your overall credit utilization, potentially hurting your score.
Additionally, unused credit cards can result in fees. Some issuers charge annual fees for cards that are not used regularly. These fees can add up over time and reduce the net benefit of holding the card.
Canceling Unused Credit Cards
If you have decided to cancel unused credit cards, there are several steps you should take to ensure a smooth process. First, review your credit card statements from the past year to ensure there are no unauthorized charges or fraudulent activity. If everything looks fine, proceed to close the account.
To cancel a credit card, follow these steps:
- Log in to your online account or call the customer service number provided by the credit card issuer.
- Request a closure of the account. You may need to provide the reason for closing the account, such as not using the card frequently or switching to a different provider.
- Confirm the cancellation request and wait for the card to be deactivated. This process may take a few days.
- Destroy any physical copies of the card and update your records accordingly.
It's important to note that canceling a credit card does not immediately remove it from your credit report. It may take up to 14 days for the cancellation to be reflected on your report, during which time you should avoid applying for new credit.
Conclusion
In conclusion, whether to keep or cancel unused credit cards depends on your individual circumstances and preferences. If you have multiple unused cards and feel comfortable managing them, you might choose to keep them for potential benefits like rewards and protection plans. However, if you have concerns about security or want to improve your credit score, canceling unused cards could be a good option.
Before making a decision, consider the following factors:
- The number of unused cards you have
- The credit limit on each card
- The interest rates on the cards
- The potential benefits of holding onto the cards
- Your risk tolerance for fraud and identity theft
- Your current credit score and goals
Ultimately, the decision to keep or cancel unused credit cards is a personal one. By weighing the pros and cons and considering your unique circumstances, you can make an informed choice that aligns with your financial goals and priorities.