Should You Cancel an Unused Credit Card?

Credit cards are confusing.

Some people view credit cards as a gift from the heavens and they use their credit card to pay off all of their bills and even fund a few vacations.

Some people view credit cards as a loaded gun and have used a credit card irresponsibly, landing them in financial ruin.

It’s safe to say credit card use is polarizing. Often times there’s advice that suggests that you should cancel any and all unused credit cards. Coincidentally, there’s also advice that says you shouldn’t cancel any unused credit cards. The truth of the matter is canceling unused credit cards affects your available credit along with your credit score, so deciding to cancel those credit cards is a decision that needs to be thought out.

So what’s a consumer to do? Read on to learn whether you should cancel your unused credit cards by examining the benefits of canceling and keeping them.

Benefits to Canceling an Unused Credit Card: Decreased Fraud Risk

Right now, literally right now, there is someone in the world that wants your credit card information. A benefit of canceling unused credit cards is that you will reduce the risk of experiencing fraud on unused credit cards. Ask anyone who has had their information stolen; it’s not a fun process to experience.

Benefits to Canceling an Unused Credit Card: No Annual Fees

Certain credit cards carry annual fees. If you’re being charged a fee for a card you don’t use, it’s not a bad idea to cancel that credit card and save yourself some extra money.

Benefits to Canceling an Unused Credit Card: Access to New Customer Deals

In case you’ve been living under a rock, you might have noticed that credit card companies spend a lot of money on advertising with the goal to attract new customers. They can entice customers with promises of 0% interest rates for the first several months and promises of using credit cards overseas. When you cancel a credit card, with enough time, you can put yourself in a position to receive good deals that only new customers have access to.

Benefits to Keeping an Old Credit Card: You Likely Won’t Negatively Affect Your Credit Score

Part of the way your credit score is determined is by analyzing your debt-to-credit ratio. By having more lines of credit open, you can protect your credit score even if you have high debt.

Benefits to Keeping an Old Credit Card: You Have Access to an Emergency Fund

While it is always better to have your emergency fund funded by actual dollars that you actually own, sometimes people don’t have enough money in the bank to serve as an emergency fund.

An unused credit card is the perfect tool to use to make sure you have access to emergency money. Accidents and emergencies do happen; make sure that you are prepared.

Benefits to Keeping an Old Credit Card: Cash Back and Rewards

It’s true, some people use credit cards instead of cash which can be a good thing — especially if your credit card offers cash back and rewards. Keeping unused credit cards that offer these incentives can be good to have because, simply, these perks are attractive and do have plenty of practical use.

The Verdict

So should you cancel your unused credit cards? It’s up to you, and everyone has a different financial situation. The best advice is to examine your needs and make a decision from there. Whatever you do, DO NOT cancel your oldest credit card, as having the same credit account open and responsibly managed over a period of years greatly influences your credit score.