If you’ve got a credit card or two sitting around that you don’t use, you might be wondering if you should close your unused cards. While you might be tempted to immediately close any card that you aren’t using, keeping a $0 annual feee card open can help strengthen your credit score. Plus, you might find your card has benefits you’re not using.
Here’s a bit more on when you should keep a card open vs. closing an unused card.
Your credit score: the biggest reason to keep your unused cards open
Your credit score can determine whether you are approved for a new credit card, what kinds of interest rates you get on car and home loans, whether you will need to pay a deposit to open a cell phone line and more. Keeping a unused card open can help you maintain a high credit score. Here’s how your unused credit card impacts your FICO score.
- Your card with a $0 balance counts as an on-time payment. The largest factor in your FICO score is your payment history, which makes up 35% of your score. A personal credit card with a $0 balance will continue to report an on-time payment history to the credit bureaus every month, strengthening your credit score.
- More available credit means lower credit utilization. The amount you owe makes up 30% of your credit score and the ratio of the balances on your credit cards to the total credit you have available factors into this part of your score. Keeping your account open means you have more available credit, which can keep your score high.
- Your open card increases the length of your credit history. 15% of your credit score includes the average age of your accounts and how long your accounts have been established. Every month, your unused card remains open, it increases the average age of your accounts, improving your credit score.
While FICO isn’t the only credit score (in fact, there are several versions and variants of FICO), most credit scoring mechanisms consider the same factors. The bottom line is that your unused, $0 balance credit card will strengthen your credit score.
Your card might have benefits and perks you can use
You might not be using your credit card because another card gets better cash back rewards, or because you want to earn airline or hotel points. But your card might be useful for certain types of purchases, especially if it includes consumer protections like extended warranty, purchase protection, or return protection.
Check out your benefits: It might be worthwhile to dig out your card’s Guide to Benefits and see if your card has any benefits that can be useful to you. If you don’t have your card’s benefit guide handy, you can likely find a description of your card’s benefits on the online portal you use to manage your account. Or you can call your card’s customer service line and have a benefits guide sent to you.
Look at card-linked offers: Another perk that might be useful is card-linked offer programs like Citi Merchant Offers, BankAmeriDeals, and Amex Offers. These targeted offers can be found on your bank’s portal or mobile app and can usually be added to your card with one click, possibly providing a meaningful discount or rebate on things you would buy anyway.
Exclusive concert access: If you go to concerts or events, an otherwise unused card might get you ticket access before tickets go on sale to the public. Capital One cardmembers got first shot at Taylor Swift tickets when the Eras tour launched. Citi and Amex frequently have cardmember-only pre-sales to popular concerts.
Good reasons to close a card
It’s likely that reason you’re considering closing a card is a very good reason to say goodbye to a card you’re not using. Whether you’re trying to avoid an annual fee or simply decluttering, there are plenty of good reasons to close a card. Here are a few.
The card has an annual fee
If you’re not getting value from a card well in excess of its annual fee, you should consider closing the card.
I’m not opposed to having a card with an annual fee. In fact, I carry several cards with annual fees. But every year, I reevaluate each card in my wallet to make sure that I’m getting value in excess of the annual fee.
If you’re paying an annual fee on a card that you don’t use, chances are that you’re not getting significant value from that card. You should probably close that you’re not using if it has an annual fee.
Reducing risk and management overhead
You incur some amount of risk for every credit card you have. While credit cards offer excellent protection against fraud, credit cards do go missing. Data breaches happen and sometimes you can find unexpected fraudulent charges even on a card you haven’t used in months. And even an unused credit card can cause some measure of mental clutter that you can do away with if you close the card.
Even if your card isn’t stolen, you still incur some amount of management overhead for every card you have. Whether that overhead is checking statements monthly, downloading transactions into an app, or simply carrying the card in your wallet, there is always a cost to having a credit card open. Closing a card that you don’t use means you’re no longer spending any time managing the card, saving you a small amount of time and mental energy
Bottom line
Keeping a card that you don’t use open can help keep your credit score high, but be sure you are monitoring your cards for unauthorized usage. If you have credit cards that you don’t use, it can be worth calling your card issuer and asking for a copy of your guide to benefits or looking for targeted card-linked offers that can save you money.
Frequently asked questions
How many points will my credit score drop if I close a credit card?
No one can tell you exactly how many points your credit score will drop if you close a credit card. The impact to your credit score is likely to be larger if your credit history if younger or if the card you intend to close represents a large proportion of your total available credit.
