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Closing a credit card you don’t use is primarily based on the facts of your situation. Be cautious about the consequences of closing a credit card, as it may actually damage your credit rather than improve it. There are many reasons why it is usually not a good idea to close a credit card.
One reason is that it can negatively impact your credit utilization rate, which is the balance you are carrying divided by your overall available credit. Another reason is that it negatively impacts your credit history by lowering your overall credit age, especially if the card is one you’ve had for a significant amount of time. Also, closing your credit card can limit your access to emergency credit options.
The only reason why it would make sense closing your credit card is if you are trying to simplify your finances if you have too many credit cards for your needs. Another reason would be if you are trying to reduce credit risk or struggle with bad credit card habits. Also, another reason it would make sense closing your credit card is if the credit card issuer charges an annual fee for the credit card. Keeping a credit card is generally a better option than closing it.
Instead of canceling your credit card that you no longer need, take a look at these alternatives. Try downgrading to a version of the credit card with no fees. You can contact your credit issuer and ask if there’s a lower-tier version of the credit card that you can downgrade to. Most lower-tier credit cards don’t have an annual fee, and you can maintain your credit history and utilization rates if you downgrade instead of canceling.
You can also use your unused credit card to pay for monthly or annual subscriptions. Your subscriptions will continue uninterrupted, and you won’t have to actively use your credit card, which can help eliminate the temptation to use the card. You can set up automatic payments with your bank to avoid missing payments.
Your credit card may seem invisible to you when you’re not using it regularly, but it’s crucial to keep an eye on your account. To make sure there are no fraudulent charges on your card, it’s important to check your balance online or on your app every week or so. To improve your credit or avoid debt, you might initially think that not using your credit card is a good idea.
While it may be a good idea in certain situations, not using your card can lead to a lower credit score. Think carefully about whether the consequences are more advantageous than keeping your card open. Regardless of whether you decide to close it or not, it’s worth taking the time to monitor your credit score, you can do that on our website, see below.
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