What Should You Do With Credit Cards You Don’t Use?

Having credit cards that are no longer regularly used is common for many individuals. These unused accounts can accumulate over time from past promotional offers, changes in spending habits, or simply being forgotten. Managing these dormant financial tools requires understanding the implications of keeping or closing them. The decisions made regarding these accounts can significantly affect an individual’s financial standing.

Understanding the Impact on Your Credit

Unused credit cards significantly influence an individual’s credit profile, particularly credit utilization. This metric, the amount of credit used compared to total available credit, benefits from a high overall credit limit. Keeping unused cards open, especially those with substantial limits, helps lower your utilization ratio, which credit scoring models view positively. Conversely, closing an account reduces total available credit, potentially increasing your utilization ratio even if spending remains constant.

The length of an individual’s credit history also plays a role in credit scoring. Older accounts contribute positively to the average age of all credit accounts, demonstrating a longer track record of responsible credit management. Closing an older, unused card can decrease this average age, which might negatively affect your credit score, especially if it is one of your oldest accounts. This factor emphasizes the value of maintaining long-standing credit relationships.

Credit scoring models also consider the credit mix, which refers to the variety of credit types an individual manages. While credit cards are a single type of revolving credit, having multiple open accounts, even if unused, can subtly contribute to a broader financial picture. Removing a card might slightly alter this mix, although its impact is typically less pronounced than changes to utilization or history length. Simply possessing an unused card does not inherently harm credit, nor does it actively build credit if no activity occurs.

Making the Decision: Keep or Close?

Deciding whether to keep or close an unused credit card involves weighing several financial considerations. Annual fees are a direct cost associated with keeping a card. If a card carries an annual fee and provides no tangible benefits or rewards you actively use, closing it might be a sensible financial move to avoid recurring expenses.

The age of the credit card is a significant factor due to its impact on your credit history. If an unused card is one of your oldest accounts, closing it could shorten your overall credit history, which might unfavorably influence your credit score. Therefore, maintaining an older, fee-free card, even if unused, often proves beneficial for your credit profile.

The specific credit limit of the unused card also influences the decision. An unused card can also serve as a financial safety net, providing an available credit line for unexpected emergencies, which can be a valuable asset.

Security concerns are also relevant when managing dormant accounts. An unused card might be more susceptible to fraud if you are not regularly monitoring its statements for suspicious activity. Having too many open accounts, even if unused, can also present a behavioral challenge for some individuals. The perception of readily available credit might inadvertently lead to overspending for those who struggle with financial discipline.

Action Steps for Keeping Unused Cards

For individuals who choose to retain unused credit cards, proactive management is important to ensure they remain beneficial. Setting calendar reminders for annual fees, if applicable, can help avoid unexpected charges and decide if the card still serves its purpose. These reminders can also prompt small, periodic purchases to keep the account active.

Making a small purchase every few months and immediately paying it off can prevent the issuer from closing the account due to inactivity. Many card issuers may close dormant accounts after a period of no activity. Keeping the account active ensures it continues to contribute positively to your credit utilization and history.

Storing the physical card in a secure location is advisable to prevent unauthorized use. While unused, it still represents a line of credit that could be compromised if lost or stolen. Regularly reviewing statements, even for inactive accounts, is a prudent step to detect fraudulent transactions promptly.

Ensuring your contact information is current with the card issuer is important. This allows you to receive important notices regarding account changes, potential fraud alerts, or annual fee notifications. Maintaining up-to-date information helps you stay informed about your account’s status.

Action Steps for Closing Unused Cards

If the decision is made to close an unused credit card, several steps should be followed to ensure a smooth closure. First, ensure any outstanding balance on the card is paid off completely. A zero balance is a prerequisite for closing an account, and failing to clear it can complicate the process and negatively impact your credit.

Before initiating the closure, redeem any accumulated rewards points, cashback, or airline miles associated with the account. It is best practice to redeem points beforehand, as unredeemed rewards are typically forfeited once an account is closed. Many issuers provide a grace period to redeem points after a closure request.

Contacting the credit card issuer directly is the next step to formally request account closure. This can typically be done by calling customer service, through an online chat portal, or by sending a written letter. It is advisable to note the date and time of your call, the representative’s name, and any confirmation number provided.

After requesting closure, obtain written confirmation from the issuer that the account has been closed at your request and the balance is zero. This documentation serves as proof of closure and can be useful if discrepancies arise later. Once confirmation is received, physically destroy the credit card by cutting it into multiple pieces, ensuring the magnetic strip and chip are rendered unusable.

Finally, monitor your credit reports in the months following the closure to ensure the account is accurately reported as “closed by consumer” and that the balance is zero. Credit reporting agencies may take time to update account statuses. Regularly checking your reports helps confirm the closure was processed correctly and that no unexpected activity appears.