by Maurie Backman | Aug. 3, 2019
The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
It’s one thing to have a credit card you only use for certain purposes, like travel. But if you’re holding onto a credit card that you truly never use, you may be tempted to cancel that card and free up that space in your wallet or drawer.
Canceling a credit card you don’t use absolutely makes sense when that card charges an expensive annual fee. But if that card isn’t costing you anything, here are a few reasons to keep it around.
Get free access to the select products we use to help us conquer our money goals. These fully-vetted picks could be the solution to help increase your credit score, to invest more profitably, to build an emergency fund, and much more.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
There are different factors that go into calculating your credit score, and keeping an older credit card can help with two of them. The first is credit utilization, which speaks to the amount of available credit you’re using at once. You should keep your utilization to 30% or less to keep your score in favorable territory, which means that if your total credit limit is $10,000, you should never carry a balance in excess of $3,000. Keeping a credit card you don’t use could help you maintain a higher credit limit, thereby helping your utilization -- and your score.
Additionally, the length of your credit history plays a role in determining your credit score. If the card you’re thinking of closing is one you’ve held for a long time, then it’s smart to hang onto it, because in doing so, you’ll have a long-standing account helping to bring your score up.
If you have a credit card you don’t use, you may be inclined to close that account and then apply for a new credit card with better terms or features, like a superior rewards program. But getting a new credit card isn’t a given, and if your credit score has taken a hit recently, you might struggle to get approved for one. Now, if your credit is solid, this shouldn’t be an issue, but do yourself a favor and check your credit score before making that decision.
Unplanned bills can pop up at any time. Your roof might start leaking, your car could break down, or you could get hurt and wind up with a series of medical bills following your injury.
You should already have an emergency fund with enough money to cover at least three months of essential living expenses to account for such bills, but not everyone has ample cash reserves. If you don’t have much or any money in savings, then having an extra credit card could serve as an added source of protection the next time a financial emergency strikes.
Of course, it’s always better to pay for unanticipated expenses in cash, or to charge them on a credit card but pay them off by the time your bill comes due. Carrying a credit card balance will cost you money in accrued interest, and it could also bring down your credit score by driving up your utilization. But in the absence of savings, a credit card that adds to your total credit limit could serve as a much-needed backup.
Remember, it almost never makes sense to pay an annual fee for a credit card you don’t use. But if that card doesn’t charge a fee, consider keeping it on hand. You don’t have to lug it around in your wallet all the time; just find a safe place to store it and know that it’s there when you need it.
If you have credit card debt, transferring it to this top balance transfer card can allow you to pay 0% interest into late 2022! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.