What to do with unused credit cards → How to manage unused credit cards

How to Manage Unused Credit Cards: Expert Tips

Credit cards are a wonderful financial tool that can greatly enhance our purchasing power and convenience. However, if not managed properly, they can also become a source of financial stress and damage ourcredit scores. This is especially true forunused credit cards, which can be a hidden liability that we often overlook. In this article, we will explore some expert tips on how to manage unused credit cards to avoid negative consequences and maximize their benefits.

1. Understand the Risks of Unused Credit Cards

The first step in managing unused credit cards is to understand the risks involved. One of the main risks is that these cards are more vulnerable to fraud and identity theft, as we may not be monitoring their activity regularly. Unused credit cards can also hurt our credit scores in several ways. For example, they can decrease our overallcredit utilization ratio, which is a key factor in determining our creditworthiness. They can also be closed by the issuer due to inactivity, which can reduce our available credit and increase our credit utilization ratio.

2. Decide Whether to Keep or Close Unused Credit Cards

The next step is to decide whether to keep or close unused credit cards. The answer depends on several factors, such as the card's credit limit, age,rewards, and fees. If the card has a high credit limit, a long credit history, valuable rewards, and no annual fee, it may be worth keeping open. However, if the card has a low credit limit, a short credit history, minimal rewards, and a high annual fee, it may be better to close it. Before making a decision, it's important to weigh the costs and benefits carefully and consider the impact on our credit scores.

3. Monitor the Activity of Unused Credit Cards

Whether we decide to keep or close unused credit cards, it's important to monitor their activity regularly. This can be done through online banking or mobile apps, which allow us to check our balances, transactions, and alerts. By keeping an eye on our unused credit cards, we can detect any unauthorized charges or suspicious activity and report them to the issuer immediately. We can also use this information to update our budget and spending habits, and to avoid overspending or unnecessary fees.

4. Use Unused Credit Cards Strategically

Another way to manage unused credit cards is to use them strategically. For example, we can use them for occasional purchases or emergencies, such as car repairs or medical bills. This can help us avoid using our primary credit cards and keep our credit utilization ratio low. We can also use unused credit cards to take advantage of their rewards, such as cashback, points, or miles. By using them wisely and paying them off in full and on time, we can maximize their benefits and avoid any negative consequences.

Conclusion

In summary, managing unused credit cards requires a proactive and strategic approach. By understanding the risks involved, deciding whether to keep or close them, monitoring their activity, and using them strategically, we can avoid financial stress and damage to our credit scores. It's also important to apply for credit cards wisely, choose the ones that fit our needs and goals, and pay attention to their fees and terms. By following these expert tips, we can make the most of our credit cards and enjoy their benefits without any regrets or surprises.