Should You Cancel Unused Credit Cards?

It’s exciting to be approved for a new credit card, especially one with a higher limit. However, it must have you thinking about whether you should cancel your unused credit cards or keep them.

Keep unused credit cards open for as long as you can. Your credit score will remain positive the longer you maintain your credit history with an older credit card and even more so by having a higher dollar amount of available credit usage.

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The Rule of 30% Credit Utilization

The general rule of owning credit cards is that you should not use any more than 30% of the available credit on them. Hence, if you have a credit limit of $1,000 on one of your cards, it should not be racked up to more than $300. The lower your credit usage percentage, the higher your score.

This is the main reason why you should not cancel unused credit cards. Even if one of your credit cards is near maxed out, having your unused credit cards act as available credit on hand can keep you under the 30% marker.

Being as close to 0% credit utilization is ideal. However, credit score companies like that keep at least a small balance on your credit cards to show you are still exercising responsible money-borrowing capabilities without stopping credit usage entirely for too long of a time.

Unused Credit Cards Are Great For Emergencies

Say that you have an emergency medical bill or you have to purchase a new piece of furniture for your home and you are low on cash to satisfy these costs. Utilize your unused credit cards as backup funding for larger purchases.

Just remember to pay more than the minimum payment amount to lower the interest that racks up on the credit card. Attempting to pay the balance down to under 30% in the one to three months after that purchase can work in your favor as well.

The Benefits Of Utilizing Unused Credit Cards for Recurring Bills

Another great way to utilize unused credit cards is to place one or two recurring payments on them and then pay off the debt at the end of the month. This can increase your credit score because it will show credit companies that you are on top of your finances when paying off your debts immediately.

When To Cancel An Unused Credit Card

While keeping unused credit cards open has more benefits than deficits, there may be some instances where canceling one is necessary such as:

  • If the credit card has too high of an annual fee that’s unaffordable.
  • If you have trouble keeping credit paid off because of uncontrolled overspending habits.
  • If you do not have any new large credit applications soon towards a car or mortgage where your credit can take a small hit because of a credit card closure.

Final Thoughts

Keeping unused credit cards is the best method for improving your credit. A higher available credit and credit card utilization that’s 30% and under can increase your score.

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