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 it is worth keeping a credit card they don't use. This article will delve into the pros and cons of maintaining a credit card that you do not frequently utilize.
Firstly, let's examine 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 help build your credit history. Lenders look at your credit score when evaluating your loan applications or credit limits. Having a credit card can help you establish a credit history, which can be beneficial in the future when you need to borrow money or apply for loans.
- Rewards Programs: Many credit cards offer rewards programs that can provide significant value over time. These rewards can include cash back, points that can be redeemed for travel, merchandise, or statement credits. By using your credit card regularly and paying off your balance in full each month, you can accumulate these rewards and potentially save money on future purchases.
- Protection Against Fraud: Credit cards offer fraud protection, which means that if your card information is stolen and used fraudulently, you are not responsible for any unauthorized charges as long as you report the loss promptly.
However, there are also drawbacks to maintaining a credit card that you do not use frequently:
- Potential Fees: If you do not use your credit card often, you may incur annual fees, late payment fees, or other charges. These fees can add up over time and reduce the overall value of the card.
- Credit Score Impact: If you close a credit card account, it can result in a decrease in your credit score, especially if the account was in good standing and had a high credit limit. Closing unused accounts can help maintain a healthy credit mix and prevent unnecessary credit utilization ratios.
- Security Risks: Keeping a credit card that you do not use can increase the risk of identity theft if your card details fall into the wrong hands. It is essential to protect your personal information and regularly monitor your accounts for any suspicious activity.
Given these considerations, the answer to whether it is worth keeping a credit card you don't use depends on your individual circumstances. Here are some factors to consider:
- Frequency of Use: If you only use your credit card occasionally, it might not be worth the cost of maintaining an account. However, if you plan to use it more frequently in the future, it could be beneficial to keep it open.
- Annual Fees: If the annual fee associated with your credit card is significantly higher than the rewards you receive, it might be more cost-effective to close the account and find a more affordable option.
- Credit Score: Maintaining a low-usage credit card can help improve your credit score by reducing the number of credit accounts that factor into your credit utilization ratio. If you have multiple credit cards with high balances but low usage, closing one of them could help improve your score.
- Financial Institution: Some financial institutions offer incentives for customers who maintain a certain level of activity on their credit cards. If you are considering closing your card, check with your bank to see if they have any offers or promotions that might make it more attractive to keep the card open.
In conclusion, whether it is worth keeping a credit card you don't use depends on various factors such as frequency of use, annual fees, impact on your credit score, and any potential rewards or incentives offered by your financial institution. If you find that the costs outweigh the benefits, it might be wise to consider closing the account and focusing on cards that better align with your needs and usage patterns. However, if you anticipate increasing your card usage in the future, it might be beneficial to keep the card open and take advantage of its features.
Ultimately, the decision to keep or close a credit card should be based on your personal financial goals and priorities. It is essential to review your credit card terms and conditions, compare different options, and consult with a financial advisor if needed to make an informed decision.