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 plethora of options available, it can be challenging to decide which credit card is the best fit for your needs. One common question that arises is whether it is worth keeping credit cards you don't use. In this article, we will delve into the pros and cons of holding unused credit cards and provide some insights on how to manage them effectively.
Firstly, let's understand what it means to keep a credit card you don't use. This refers to having a credit card in your wallet or wallet-less payment system that you do not actively use for transactions. You might have received such a card as a gift, signed up for a promotional offer, or simply accumulated over time without using them regularly.
On the one hand, keeping unused credit cards can have several advantages:
- Emergency Cash Access: Unused credit cards can serve as a source of emergency cash if needed. Some cards offer cash advance features, allowing you to withdraw money from your credit limit. However, it's essential to note that cash advances often come with high fees and interest rates, making them a last resort option.
- Credit Protection: Keeping unused credit cards can help protect your credit score. Credit card issuers sometimes cancel unused cards after a certain period of inactivity, which can lead to a drop in your credit utilization ratio. A lower utilization ratio can positively impact your credit score, making it easier to qualify for loans and other financial products in the future.
- Potential Rewards: Some credit cards offer sign-up bonuses or ongoing rewards programs. If you have an unused card that meets these criteria, you could potentially earn points or cash back on your purchases.
However, there are also drawbacks to keeping unused credit cards:
- Security Risks: Unused credit cards can pose security risks if they fall into the wrong hands. It's important to store your cards securely and monitor your accounts regularly to detect any unauthorized activity.
- Annual Fees: Many credit cards charge annual fees, regardless of usage. If you have multiple unused cards, these fees can add up and reduce your net benefits.
- Credit Score Impact: Each credit card you hold contributes to your overall credit utilization ratio. Having multiple unused cards can increase your utilization rate, potentially harming your credit score.
Given these considerations, it's essential to evaluate whether keeping an unused credit card is worth it for you. Here are some guidelines to help you make an informed decision:
- Review Your Cards: Take a close look at all the credit cards you hold. Consider their terms, rewards programs, and your current usage patterns. If you find that you rarely use a particular card, it might be worth considering closing it.
- Evaluate Annual Fees: Check the annual fees associated with each card. If you find that the fees outweigh the potential benefits, it might be more cost-effective to close the card and focus on those that offer better value.
- Consider Security Risks: Evaluate the security features of each card and your personal risk tolerance. If you feel that the potential loss of a card would cause significant financial or emotional distress, it might be wise to keep it open.
- Monitor Your Credit Score: Keep track of your credit score and monitor it regularly. If closing unused cards helps maintain a healthy credit utilization ratio, it could positively impact your score.
In conclusion, whether it's worth keeping an unused credit card depends on various factors, including the card's terms, your personal usage patterns, and your risk tolerance. By carefully evaluating each card and considering the potential benefits and drawbacks, you can make an informed decision about whether to keep or close unused credit cards. Remember, managing your credit cards effectively can lead to improved financial health and a healthier credit score.