Home > Credit 101 > What Should I Do With a Credit Card I Never Use?

Comments 0 Comments

They are the knickknacks of your personal financial lives: those old credit cards you seldom use. You might dust them off occasionally and charge something, but they often remain tucked away in a drawer or wallet, unused and overlooked.

Every once in a while, though, you may wonder what do they do to your credit scores? A consumer recently asked us:

How frequently should I use my seldom-used credit cards? (Such store credit cards that I might use every few years?)

The basic answer is that most credit scoring models don’t reward you for frequent activity on your accounts — or penalize you for lack of activity. Instead they generally focus on factors such as your balances and whether you pay on time. (There are models that may look at your activity to target you for special promotions, but that’s another matter.)

If you stop using a card, there is a risk that your issuer may close it, and that may affect your credit score by reducing your available credit.

On the other hand Credit card expert Jason Steele, a Credit.com contributor, says he doesn’t worry too much about issuers cancelling his old accounts. In an email he said:

In most cases, you will not have your credit card account closed for inactivity. Many credit cards charge an annual fee, which the banks are certainly happy to collect, even if you don’t cancel your card. Yet even the no-fee cards rarely have inactivity clauses, so it is not much of a concern. I have some cards that I use very rarely, less than once a year on average, but I keep the account open and have never been canceled for inactivity.

The Hidden Danger

But there is a hidden danger in keeping your old credit cards you don’t use anymore open. If a charge is made to the account — for an annual fee, a recurring subscription or even a fraudulent charge, for example — and you don’t realize what’s happened, the bill could go unpaid. That’s what happened to Tim Olson, one of my colleagues at Credit.com:

One time I ‘closed’ a card with Wells Fargo; in fact, I closed all my accounts and move to Chase so whenever I would receive ongoing mail from Wells, it turned about to be all junk mail trying to get me back.

So at some point I stopped opening the mail from Wells and just tossed it. Then one year later, one of my cards that I had ‘closed’ was not really closed the right way and went into some sort of temporarily closed status. Then I was hit with the annual fee, which of course, I didn’t know. Then the $36 fee went past due and it was about a year later that I discovered my score had been crushed.

After some research, Olson discovered that the employee who “closed” the account for him at the branch didn’t properly do so. “Wells fixed the problem after some serious letter writing on my part, but my story just illustrates the dangers of the variety of ‘closed’ accounts that exist,” he says.

To avoid this kind of problem, if you decide not to close an account and you previously received your statements by mail, make sure you alert your issuer of your new address if you move. If you receive your statements online, you may want to set up text message or email alerts to notify you if there is activity on the account.

The Smart Way to Close An Old Account

There is a right way and a wrong way to close an account you don’t want anymore. The right way is to get your free credit report from at least one of the major credit reporting agencies so you can see what is being reported. (Here’s how to get your free annual credit report.)

Then take a look at your “debt usage” ratio; in other words, how do your reported balances compare to your available credit limits? (You can check your credit scores and get an analysis of your debt usage for free from Credit.com.)

Next, subtract the credit limit on the account you want to close from your total credit limits. How will that change your debt usage ratio? If closing this account means that figure will jump significantly, you may want to consider either asking for a credit line increase from the cards you are keeping, or hold off on closing the account. Generally, keeping your balances below 10% of your available credit is the safest bet, though most people will still have a good score if they keep them at 25% or less.

If you decide to close it, make sure you follow up to ensure it’s actually been closed. You should get a letter or statement from the issuer confirming it’s been closed. If you don’t, contact your card issuer and request it. Keep that documentation indefinitely in case it pops up again later.

More on Credit Cards:

Image: dnberty

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team