Suppose you have too many credit cards and cannot manage them all wisely. Should you cancel unused credit cards? Is it better to close unused credit cards? Is this going to have an impact on my credit score? Let’s discuss when to close these cards with Hanfincal (hanfincal.com).

1. How close to unused credit cards can hurt your credit score?

Here are 2 things that closing unused credit cards can hurt your credit score.

1.1. Decreased the average length of credit history

Your credit score is 15% determined by the length of your credit history. When you close a credit card, your total credit length decreases. Perhaps 15% isn’t a big deal in terms of your overall credit score but think twice before deciding to lose this score.

Here is an example of reducing the length of one’s credit history. Suppose you’ve had the $4,000 limit card for six years and the $6,000 limit card for two years. When you close the card with the $4,000 limit, your only open credit card account will be two years old. With a credit length of only two years, you will limit the incentives and significantly lower your credit score.

1.2. Increased credit utilization ratio

The credit utilization ratio accounts for 30% of your overall credit score. If you close your unused credit card, this rate will increase since it is based on the total usage of all your remaining credit cards.

Therefore, we recommend you consider carefully before closing any unused credit card, especially if your credit utilization ratio is higher than 30%.

For example, if you have a $2,000 credit line on one card and a $3,000 credit line on another, your total available credit is $5,000. If you currently owe $1,000 on two credit cards, your credit utilization rate is 20%.

Assume you have a $1,000 balance on the credit card with the higher credit limit and decide to close the other. When you close the card with a $2,000 credit line, your total available credit decreases to $3,000.00. When you have $1,000 in credit card debt, your utilization rate rises to 33%. This is a red flag that will harm your credit score.

How close to unused credit cards can hurt your credit score?

How close to unused credit cards can hurt your credit score?

2. What to do with an unused credit card if you don’t cancel it?

Before deciding what to do with unused cards, you should look at what happens if you don’t use your credit card. After that, there are 6 ways to do with an unused credit card if you don’t cancel it:

  • Reduce your annual fee by switching to a no-fee card: Consider a card with the same issuer that has no annual fee. You could also try to negotiate a no-fee card with no annual fee.
  • Cut your cards: You won’t be able to use it or grow your balance this way, but your account will remain active.
  • Negotiate a lower price: If a high APR is a driving force behind your decision to close your account, contact the card issuer and try to negotiate a lower interest rate.
  • Make contact with a non-profit credit counseling organization: Credit counselors can assist you in developing a budget and gaining a complete picture of your finances. They can also work with your current creditors to negotiate lower interest rates.
  • Maintain the card, but use it wisely: Set it aside for a specific purpose and use it occasionally.
  • Transferring to a card with a 0% intro APR: To save money on interest, consider transferring the balance to a card with a zero-percentage-point intro rate.

3. When should you close your unused credit card?

Here are some reasonable reasons for you to close unused credit cards:

  • One primary reason to close an unused credit card is if it has a high annual fee.
  • When you have too much temptation.
  • You have a card that you don’t use very often, and its rewards program has changed.
  • Your credit card is causing you undue financial stress.
When should you close your unused credit card?

When should you close your unused credit card?

4. 6 steps on how to cancel unused credit card safely

Six steps can help you cancel your unused credit card safely:

  1. Before you call to cancel, use any unused rewards on your account.
  2. Before canceling your card, pay off your balance.
  3. Call your credit company to cancel and confirm that your account balance is $0.
  4. To cancel the account, send a certified letter to your card issuer.
  5. Shred your card when you receive the confirmation email or letter stating that your account has been closed.
  6. Examine your three credit reports within 30 to 45 days of cancellation.

Generally, canceling your credit card will affect your credit score in most cases, but there are still a few ways that a few people know about how to cancel a credit card without hurting your credit.

Should you close unused credit cards? Consider the situations in which you should and should not cancel or close your unused credit cards, as mentioned by Hanfincal (hanfincal.com). If canceling hurts your credit score, try to keep your cards open and use them wisely.

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