When it comes to credit cards, most of us focus on how much we spend, what interest rates we pay, or how quickly we can pay off balances. But what about those cards you never use? Maybe you opened a card years ago, used it once or twice, and then tucked it away somewhere safe. You might think an unused credit card is harmless, or maybe even good for your credit score. But like most things in finance, the story is a bit more complicated.
For those juggling multiple cards or struggling with debt, understanding how unused cards fit into your financial picture is important. Some people seeking debt relief might even overlook these cards as part of their overall strategy. Let’s dive into the ways an unused credit card can impact your finances—both the good and the not-so-good.
How Unused Credit Cards Can Help Your Credit Score
One of the main reasons people hold onto unused credit cards is to keep their credit utilization rate low. Credit utilization is the ratio of your credit card balances to your total available credit, and it plays a big role in your credit score. If you have $1,000 in balances across all cards and $10,000 in available credit, your utilization rate is 10%, which is great. But if you close an unused card, you reduce your available credit, which can bump up your utilization rate and potentially lower your score.
Having more available credit with low balances shows lenders you’re responsible and not overextending yourself, which can make you a better candidate for loans or new credit. This can be especially helpful if you’re working through debt relief or trying to rebuild your credit history.
The Hidden Costs: Annual Fees and Other Charges
On the flip side, not all credit cards are free to keep. Some come with annual fees that can quietly eat away at your finances if you’re not paying attention. Keeping an unused card that charges fees means you’re paying for something you’re not benefiting from.
Even if your card doesn’t have an annual fee, watch out for other charges like inactivity fees or penalty rates if the issuer decides to change your terms. These costs add up and can create frustration if they surprise you on your statement.
Risks of Inactivity: When Cards Get Closed
Credit card issuers don’t always appreciate inactive accounts. If you don’t use your card for a long time, some companies may close your account due to inactivity. When this happens, your total available credit decreases, which can negatively affect your credit utilization and credit score.
Also, a closed account can reduce the average age of your credit accounts, another factor credit scoring models consider. The longer your credit history, the better it generally is for your score. Losing an older card can therefore have an unintended impact.
Security Concerns With Unused Cards
Unused credit cards can sometimes become targets for fraud or identity theft. If you’re not monitoring your statements regularly, unauthorized charges could go unnoticed for a while. This could lead to stress and financial headaches down the line.
To protect yourself, it’s important to keep an eye on any account you hold, even if you don’t use it often. Setting up alerts or online account access can help you spot suspicious activity early.
How to Decide Whether to Keep or Close an Unused Card
Deciding what to do with an unused card depends on your individual situation. Ask yourself a few questions: Does the card have an annual fee? How long have you had it? How does it affect your credit utilization? Could you use it occasionally to keep it active without overspending?
If the card is fee-free and boosts your credit limits, keeping it open and using it lightly every now and then might make sense. If it charges a hefty fee and you’re not getting benefits, it might be worth closing—just be prepared for a possible short-term dip in your credit score.
Incorporate Unused Cards Into Your Debt Relief Plan
If you’re managing debt or working toward debt relief, think of your unused cards as part of the bigger picture. Sometimes, using an unused card responsibly can help improve your credit history or make payments easier. Other times, cutting ties with a card might simplify your finances and reduce temptation to overspend.
Discussing these choices with a financial advisor or credit counselor can help you craft a plan that aligns with your debt relief goals and financial wellness.
Unused credit cards aren’t automatically good or bad—they’re tools that can impact your finances in different ways depending on how you manage them. By understanding the effects of keeping or closing these accounts, including the impact on your credit score, fees, and security, you can make smarter decisions that support your financial health.
Keeping unused cards active with small, regular use or closing those with costly fees are both valid options. The key is to stay informed, monitor your accounts, and align your choices with your long-term goals. How will you handle your unused credit cards going forward?
