What to Do With a Credit Card You Don’t Use?

An unused credit card refers to an open credit account that is not regularly used for purchases or daily transactions. Individuals often acquire these cards for various reasons, such as initial sign-up bonuses, specific large purchases, or balance transfers that have since been paid off. Over time, these cards may simply fall out of regular rotation. Understanding the implications of keeping or closing these accounts is important for managing personal finances effectively.

Keeping an Unused Credit Card Open

Keeping an unused credit card open can offer several financial advantages, particularly concerning one’s credit score. A longer credit history, influenced by the age of your oldest active accounts, contributes positively to your creditworthiness. Maintaining older, unused cards helps extend the average age of all your credit accounts, a factor in credit scoring models.

Additionally, an open, unused credit card can improve your credit utilization ratio. This ratio compares your total outstanding credit balances to your total available credit across all accounts. Keeping an unused card open maintains a higher total available credit limit, which helps keep your utilization ratio low if you are not carrying large balances on other cards. A lower utilization ratio signals responsible credit management to lenders.

An unused credit card can also function as an emergency financial reserve. In unexpected situations, such as unforeseen medical expenses or urgent home repairs, an available credit line can provide a necessary safety net. This can prevent the need to deplete savings or take out high-interest loans during times of crisis.

To prevent an issuer from closing an account due to inactivity, use the card occasionally. This could involve making a small, infrequent purchase, such as a streaming service subscription or a single monthly bill payment, and then paying off the balance immediately. Some cardholders set up a small recurring bill for auto-pay to ensure consistent activity without accumulating debt.

It is advisable that any unused card you keep open does not carry an annual fee. An annual fee can negate the benefits of keeping the card, especially if it is not providing active rewards or benefits. If the card does have an annual fee, consider contacting the issuer to see if it can be converted to a no-annual-fee product.

Even if a card is rarely used, secure the physical card and monitor its activity. Storing the card in a secure location prevents unauthorized use. Regularly checking statements, even if they show no activity, helps detect fraudulent charges or errors promptly. Timely review ensures financial security and helps maintain accurate credit reporting.

Closing an Unused Credit Card

Deciding to close an unused credit card involves a specific process and can have various financial consequences. Before initiating closure, ensure the card has a zero balance, as any outstanding debt will need to be paid off. Contact the credit card issuer directly to formally request the account closure.

It is advisable to request written confirmation of the account’s closure for your records. This documentation serves as proof if any discrepancies arise later regarding the account status.

Closing a credit card can impact your credit score by reducing your total available credit. This reduction can increase your credit utilization ratio if you carry balances on other cards, as the same outstanding debt is now spread across a smaller total credit limit. A higher utilization ratio negatively affects your credit score.

Closing an older credit card may also shorten the average age of your credit accounts, another factor in credit scoring models. If the closed card was one of your oldest accounts, its removal from your active credit history could reduce the overall average age, potentially lowering your score.

Despite potential credit score impacts, closing a card can be a reasonable decision in certain scenarios. If a card carries a high annual fee that outweighs its benefits, closing it can save money. Similarly, if the card presents a temptation for overspending or if you prefer to simplify your financial accounts, closure might be beneficial for personal financial management.

After closing an account, check your credit reports from all three major credit bureaus to ensure the account is accurately reported as closed by the issuer. This helps confirm the closure was processed correctly and prevents future reporting errors.

Important Considerations for All Unused Cards

Regularly monitoring your credit reports is a fundamental practice for all credit accounts, including those that are rarely or never used. You are entitled to a free copy of your credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—once every 12 months through AnnualCreditReport.com. Reviewing these reports helps identify inaccuracies and detect any unauthorized activity or fraud.

For any physical cards you keep but do not use, ensuring their security is important. Store them in a safe place to prevent loss or theft. If you decide to close a card, properly dispose of the physical card by shredding it into small, unreadable pieces to prevent unauthorized access to your account information.

It is also important to understand the terms and conditions of your credit cards, even those you do not actively use. Some card issuers have inactivity clauses that allow them to close accounts due to prolonged periods of non-use. Reviewing these terms can help you avoid unexpected account closures by the issuer.

Periodically reviewing statements for unused cards, even if they consistently show a zero balance, is a good practice. This review helps confirm no erroneous charges or fraudulent activities have occurred on the account, preventing small, unnoticed charges from escalating into larger financial problems.