Should You Keep Unused Credit Cards

Having multiple credit cards is becoming more common in India due to the variety of benefits that come with them. While you may have opted for a credit card with some specific purpose, your financial goals and priorities may change over time, making some of your credit cards redundant.

If you already have multiple credit cards and are wondering whether you should keep them or cancel some of them, this blog will answer all your queries.

Why You Should Not Cancel Your Unused Credit Card

Your credit utilisation ratio may go up

Your credit utilisation ratio is the ratio of credit utilised by you at a given point of time as compared to your total credit limit. The lower this ratio, the better your credit score will be. However, when you cancel a credit card account, your available credit limit will reduce, thus reducing the denominator of the ratio. This will lead to an increase in the credit utilisation ratio if you continue to use the same amount of credit.

For example, if you have a credit card with a credit limit of Rs. 80,000 and another credit card with a credit limit of Rs. 70,000, your total credit limit will be Rs. 1,50,000. If you typically utilise around Rs. 40,000 between the two credit cards, your typical credit utilization ratio will be around 26%. Suppose you choose to cancel the credit card with Rs. 70,000 as the credit limit, your total available credit limit decreases to Rs. 80,000. If you continue to spend Rs. 40,000, your credit utilization ratio will start getting higher than 30%, which is not recommended.

The average age of your credit accounts may decrease

The length of your credit history is another important factor in determining your credit score. Therefore, canceling a credit card, especially an old one, will reduce the average age of your credit accounts and negatively impact your credit score.

There’s no harm in keeping a free credit card

If you are currently not using a particular credit card but the card has no annual maintenance fees, there’s no harm in keeping it. Also, a credit card that has zero to minimal annual charges can be kept as a financial backup in case of emergencies. Many credit cards also offer an annual fee waiver if you reach a certain spending milestone. Carefully plan out your expenses to check if you really need to cancel a credit card or if you can manage multiple credit cards efficiently.

You might miss out on seasonal offers

If you are thinking of canceling a credit card because you are not using it regularly, you might want to consider the fact that some credit card issuers offer attractive seasonal offers and EMI options on certain products, such as high-value electronics. If you are planning to make any such purchase, and the card doesn’t come with hefty fees, you can decide to keep the card specifically for such purchases.

Can Having Too Many Credit Cards Harm You

Getting a new credit card has to be a carefully thought-out decision. Once you opt-in for a credit card, it is not a good idea to close it, as it may do more harm than good. However, if you think you already have too many credit cards, here are some possible reasons why it may be the right decision for you to cancel an existing card.

You tend to overspend

If you have many credit cards, you might feel a false sense of purchasing power, which may lead to overspending. For example, buying expensive gadgets on credit cards is easier as compared to spending cash for the same. You also have the option of converting the purchase into EMIs, making it seemingly affordable. However, if you underestimate the burden it might add to your monthly cash outflow, you can easily fall into a debt trap.

You find it difficult to manage multiple bills

With multiple credit cards, you will most likely have multiple billing cycles. If you do not have a standing instruction or auto-pay activated on your credit card, you may easily miss out on a repayment. Having different bill cycles will also mean that you get some time between two repayments, which may lead to overspending on the card whose bill is not due immediately.

You are paying high maintenance fees

This may happen, especially with premium credit cards. Premium credit cards have higher maintenance fees, which are typically waived to a certain extent only if you achieve a particular spending milestone. Thus, if you are not using the credit card regularly, you will end up paying hefty maintenance fees for it.

The Bottom Line

There is no standard rule regarding the number of credit cards one must possess. Nevertheless, you must carefully consider the benefits you are getting from a particular card before opting for it. If a smooth credit card experience and better rewards are your primary criteria for getting a credit card, One Credit Card can be a great option for you. With OneCard, you can enjoy:

No Joining Fees and No Annual Fees

There is no need to worry about the maintenance fees that come with typical credit cards.

Powerful Mobile App

Control all aspects of your credit card using the OneCard app. Whether it is managing your spending or locking your credit card, everything is available with just a few clicks on your app.

5X Rewards on Your Top Spends

There is no need to have multiple credit cards to get rewards in multiple categories. Simply spend on at least three categories in a month and get 5X rewards on your top two categories.

And much more…