Should you cancel an unused credit card? That is the question that we are going to be answering today. According to Shakespeare, we are going to be asking ourselves whether to cancel or not to cancel. Anybody thinking of cancelling a credit card probably already has all the credit cards that they use frequently.
Therefore, since they are not making use of some of their other credit cards, it seems that cancelling them is the right option. However, before you go ahead and cancel your credit card, read this article to the end. Because in this article we have answered that question for you, whether you should cancel or not cancel an unused credit card.
Should you cancel an unused Credit Card?
A cardholder having too many cars is not a good look for your credit history and score. The only way I’ve been told many cards are good for your credit score is if you can maintain them appropriately. So you have multiple credit cards and are not using some of them. Should you cancel them? This is the question almost every cardholder that is not making use of a particular credit card is asking.
The good news, however, is that you have come to the right night at Eco and we are going to be answering that question below. So that we give you all the necessary options and equipment you need to make the right decision for yourself.
Why shouldn’t you cancel unused Credit Cards?
Let me just go ahead and answer the question right out of the blue. Counselling and unused credit cards is not a good thing because it will take a direct hit on your credit score. This is why it is very important that you might want to keep an unused credit card account open. You need to correctly manage your credit card account that is currently in use so that it can continue improving your score.
Closing down an unused credit card will lead to a decrease in some of the factors that constitute your credit score. As a result of this, your credit score is definitely going to take a hit by going down as well. Therefore, it is wise to keep an old or unused credit card. Below are some of the factors that will be affected when you close down an unused credit card:
- Payment history of 35%
- The credit utilization ratio of 30%
- Credit card history duration: 15%
- A 10% discount on a new credit card
- Credit mix of 10%
Above you can find some of the factors that make up your credit score, so closing down an unused credit card will affect the score negatively.
Details on How cancelling an unused Credit Card affect your Credit Score
When we say that cancelling an unused credit card affects your credit score, you might think it is a joking matter. It is not a laughing matter. When you cancel an unused credit card, your credit score is impacted negatively, but not right away. One of the downsides to closing an unused credit card is that it will remain on your credit report for up to 10 years. which is a major turn-off for lenders.
Now that it has finally left your credit report, your average age of accounts will likely go down and your total credit limit will decrease. This is the aspect that hurts your credit utilisation ratio the most. Having said that, by closing time and unused credit card, your mix of ten also produces, further deepening your credit score. All things considered, it is more rewarding to leave a credit card account open than closed.
What do you do with unused Credit Cards?
Now that you have seen that it is very damaging to close down an unused credit card, what do you do with them? One of the things to do with an unused credit card is to simply use it as a bill payment option. So the credit card is active and you do not rely on it much. You only use it for bill payments. What you want to do is that you need to set up a payment reminder so that you never miss a payment.
When should you cancel an unused Credit Card?
Although it is not beneficial to keep an unused credit card and close it, there are times when closing it is very necessary. You can cancel your credit card if you have an annual fee that makes it no longer worth using the card. But you should only cancel your issue with someone who refuses to reduce or give you a zero annual fee.
Another reason to simply cancel an unused credit card is if you have a bad habit of spending more than you can control. If you spend more and find it difficult to pay back, definitely cancel the credit card. Finally, if you have a better credit card than the one you already have, you can simply decide to cancel the two and continue with the better one.
How to cancel your Credit Card
Cancelling a credit card is a very easy thing to do, but before you cancel, there are certain things that you need to put in order. To cancel your credit card, follow the steps below:
- First of all, you need to pay off all your balances before cancelling the car so as not to raise your interest.
- Once you are done paying off all the debt and balances Now contact your credit card issuer about your intention to cancel. However, confirm that your balance is zero before asking them to cancel.
- Finally, follow up with a cancellation letter stating that you are closing your account and that your credit record reflects that you have closed down the account.
If you follow these steps correctly, you will successfully close down your credit card account. But first of all, read this article through and through to decide if it is worth closing down your credit card unused account.
Frequently Asked Questions
Does closing an unused credit card hurt your credit?
The answer is yes, it is going to hurt your credit by reducing some of the factors that make up your credit score. Therefore, you might want to keep an unused credit card instead of closing it.
Why should you not close your credit card?
The main reason for not closing down your credit card is simply the fact that it will impact your credit score negatively. And also that closing down a credit card will reflect on your credit report for 10 years, which is a major turnoff for lenders and other financial institutions.