Should you discontinue your credit card if you are not using it anymore?

Have you just stopped using a credit card? If yes, should you close the card altogether? Well, this is not as simple as it sounds. Closing a credit card that you are not currently using is a decision that calls for consideration of several benefits and drawbacks.

But before you take a decision, be mindful of these factors:

1 Keeping the card open helps maintain a lower utilisation ratio, which positively impacts your credit score.

2. Closing an older card can bring down the average age of your accounts, thus lowering your score.

3. If the credit card doesn't charge an annual fee, it may be worth keeping as it practically costs you nothing to maintain.

4. Some cards offer perks such as extended warranties, purchase protections, or discounts that might still be useful.

5. The card can serve as a backup in case of unexpected expenses.

Notwithstanding these advantages, closing a card may have some advantages as well. These are some of the reasons when closing a card is a good idea.

Closing a card may be a good idea:

1. High annual fees: If the card has an annual fee and you're not using the benefits, it may not be worth keeping.

2. Overspending: If possessing a credit card makes it hard to control spending, it may be better to close it.

3. Streamline finances: If you have too many cards and managing them feels overwhelming, closing one can simplify things.

However, if you still decide to close the card you need to make sure that you do the following:

1. Redeem rewards first: Use any points, cash back, or miles before closing the account.

2. Check your utilisation: If the card has a high credit limit and you're carrying balances on other cards, closing it could increase your utilisation ratio.

Additionally, some issuers allow you to downgrade to a no-annual-fee version, letting you keep the credit line open.

Ultimately, consider how the card fits into your financial goals. If you're a travel freak, for instance, unused cards with travel perks might still be valuable even if rarely used.