It is better to keep unused credit cards open than to cancel them because even unused credit cards with a $0 balance will still report positive information to the credit bureaus each month. It is especially worthwhile to keep an unused credit card open when the account does not have an annual fee.
Still, there are times when it may be beneficial to close your credit cards, such as to avoid expensive annual fees. And if you’re worried about your credit score, you can use WalletHub’s free credit score simulator to see the potential impact closing a credit card will have
Why It Is Better to Keep Unused Credit Cards
Just keeping unused credit cards open helps your credit by maintaining the total amount of credit you have available and preserving the length of your credit history. If you don’t use a credit card, your account will still get reported to the credit bureaus as being in good standing every month, assuming you have a $0 balance. This will continue to add positive information to your credit reports, helping your credit score.
On the other hand, when you close a credit card, especially if it’s one of your oldest credit accounts or one that has a high credit limit, your credit score will likely suffer a bit.
When It Is Better to Cancel Credit Cards
Despite the potential for credit score damage, it is important to remember that there are a few situations when it might be better to close unused credit cards rather than leave them open. If your unused credit card charges an annual fee, for example, and you don’t need your credit score in its best shape for a while, it’s probably best to save the annual fee and close the account.
On the other hand, if you want to cancel your credit card because you are concerned about overspending, try locking it away in a safe place first. If that doesn’t work, it will likely work out better for you and your financial future to close the credit card account, even if your credit score takes a hit.
This answer was first published on 08/22/22 and it was last updated on 08/30/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
In general, keep unused credit cards open so you benefit from longer average credit history and lower credit utilization. Consider putting one small regular purchase on the card and paying it off automatically to keep the card active. At Experian, one of our priorities is consumer credit and finance education.
Is it better to close a credit card or have it closed due to inactivity? ›
Keeping the card open can help maintain a healthy credit score by contributing to your credit history and utilization ratio. However, there are valid reasons to consider canceling, such as high annual fees or difficulties managing multiple accounts.
Is closing a credit card worse than not using it? ›
“When you close a credit card, you lose the available credit limit on your account. This can increase your utilization rate or your balance-to-limit ratio, which in turn will temporarily lower your credit score,” says Rod Griffin, senior director consumer education and advocacy at Experian.
Is it bad to close a credit card with zero balance? ›
Your credit utilization ratio goes up
By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.
Is 5 credit cards too many? ›
There is no right number of credit cards to own, and owning multiple cards gives you access to different rewards programs that various cards offer. Owning five cards, for example, would give you a bigger total line of credit and lower your credit utilization ratio.
Is it bad to have a lot of credit cards with zero balance? ›
However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.
What happens to a credit card if you never use it? ›
If you don't use your card, your credit card issuer may lower your credit limit or close your account due to inactivity. Closing a credit card account can affect your credit scores by decreasing your available credit and increasing your credit utilization ratio.
How often should you use a credit card so it doesn't close? ›
Use each card at least every few months to keep the account active. Set it on autopilot: Put a small recurring charge, like a subscription for a streaming service, onto a card you no longer use often. Then, set up autopay so you know the bill will be paid in full and on time.
How long will a credit card stay active without use? ›
Before you run out and charge something just to keep your account active, however, you should know that it usually takes a year or more of inactivity for the issuer to close the card. It's also important to note that you might not get any warning that your issuer is closing your account.
How do you close a credit card account without hurting your credit? ›
If you pay off all your credit card accounts (not just the one you're canceling) to $0 before canceling your card, you can avoid a decrease in your credit score. Typically, leaving your credit card accounts open is the best option, even if you're not using them.
The answer is worth repeating loud and clear: Never, under any circ*mstances, should you close a credit card less than one year after opening it. While it is possible to do so, there are many reasons why canceling a credit card before the annual fee is due is a bad idea.
Is it bad to close a credit card with an annual fee? ›
Experts generally don't recommend you ever cancel a credit card, unless you're paying for it (such as in the form of an annual fee) and not ever using it. And if this is the case, canceling a card once probably won't hurt you as long as you have a healthy credit history otherwise.
Is it better to have open credit cards with no balance? ›
An active card can help your credit, but a zero balance is best for your score.
Is it better to have a low balance or no balance? ›
The lower your balances, the better your score — and a very low balance will keep your financial risks low. But the best way to maintain a high credit score is to pay your balances in full on time, every time.
How long does closing a credit card hurt your credit? ›
The closed account's details, including its payment history and credit limit, will show on your credit report for up to seven or 10 years. Does closing a credit card affect my average account age? It depends. Closing an account that's been open for a long time will affect your average account age the most.
Is there any benefit to Cancelling a credit card? ›
No more temptation to go into debt:
If you are considering closing a credit card, this gives you an opportunity to close the credit card account with a highest interest rate. In the long run, maintaining financial health could be much better for your credit score than the benefits of keeping the card account open.
Is it better to stop paying credit cards? ›
It's generally never a good idea to stop paying your credit card bills. Missing a payment by a single day can be costly, and the longer you go without paying the minimum amount due, the more damaging it can be to your credit score and financial well-being.
