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 online shopping and the ease of carrying multiple cards, many people find themselves with unused credit cards in their wallets. The question that arises is whether it is better to keep an unused credit card or not. This article will delve into the pros and cons of keeping an unused credit card and provide insights on how to manage your credit card portfolio effectively.
Firstly, let's understand what an unused credit card means. An unused credit card is one that has not been used for any transactions within a certain period, usually a year. Some people may have more than one unused credit card due to changes in their financial situations or personal preferences.
Keeping an unused credit card can be beneficial for several reasons. Firstly, it provides a safety net in case of emergencies. In case of unexpected expenses or unforeseen events, having a credit card that hasn't been used recently can come in handy. Additionally, some credit card companies offer extended warranty coverage on purchases made with their cards, which can be useful if you need to purchase an expensive item like a laptop or smartphone.
Another advantage of keeping an unused credit card is the potential for earning rewards. Many credit card companies offer sign-up bonuses, cashback offers, or points that can be earned simply by using the card once a month. These rewards can add up over time and can be redeemed for various benefits such as travel, merchandise, or statement credits.
However, there are also downsides to keeping an unused credit card. One of the main concerns is the risk of fraud. If your credit card details fall into the wrong hands, it could lead to unauthorized transactions or identity theft. To mitigate this risk, it is essential to regularly monitor your credit card statements and report any suspicious activity immediately.
Another disadvantage of keeping an unused credit card is the possibility of accruing interest charges. Credit card issuers typically charge interest on outstanding balances, and if you have an unused card, the balance might continue to grow without being paid off. This can result in higher costs and negatively impact your credit score if not managed properly.
To manage your unused credit cards effectively, consider the following steps:
1. Review your credit card terms and conditions: Before deciding to keep an unused credit card, read the terms and conditions carefully. Some cards may have fees for not using them, while others may offer rewards for maintaining a low balance. Choose the card that aligns with your needs and preferences.
2. Regularly check your statements: Make it a habit to review your credit card statements regularly to ensure there are no unauthorized transactions or charges. Set up automatic payments to avoid late fees and maintain a clean credit history.
3. Consider closing unused cards: If you have an unused credit card that you do not plan to use, consider closing it. Closing a card can help reduce the number of accounts you have, making it easier to manage your finances and improve your credit score. However, before closing a card, ensure that you have no outstanding balances or pending transactions.
4. Opt for a rewards card: If you decide to keep an unused credit card, choose one that offers rewards or cashback on your everyday spending. This way, you can still benefit from the rewards program while minimizing the risk of fraud and interest charges.
5. Monitor your credit score: Keeping track of your credit score is crucial for managing your financial health. Regularly check your score and take necessary actions to improve it, such as paying off debts and avoiding unnecessary credit inquiries.
In conclusion, whether it is better to keep an unused credit card depends on your individual circumstances and preferences. While there are benefits to having an unused card for emergencies and rewards, it is essential to weigh these against the risks of fraud and interest charges. By following the steps outlined above, you can manage your unused credit cards effectively and make informed decisions about their usage. Remember, responsible credit card management is key to maintaining a healthy financial future.