Your decision to keep or ditch old and unused credit cards can affect your credit score and the amount of credit available to you. Both have pros and cons and you need to examine the worth of hanging on to that plastic you are not making full use of.
Go Credit Report offers a quick guide on owning and ditching old and unused credit cards.
Cancel the Cards
When you choose to jettison unused cards, it will increase your chances of being accepted for the best credit card deals when you apply in the future. This also proves to be a good idea, as keeping cards you barely use is frowned upon as a fraud risk. The debt you have on the cards, furthermore, may negatively affect the affordability calculation of lenders.
Keep the Cards
There still are advantages, however, to hanging on to cards you barely use. When you pay off credit card debts using your savings, it will boost the cash you have. This is because the interest paid on savings is less than the interest charged on borrowing. Keeping them will also give you access to existing deals and offer additional protection when you spend.
The Ideal Number
According to This is Money, it is advisable to clear your wallet if you carry about more than four or five. This is because your debt may build up and it will be hard for you to repay. It is fine, however, to have credit cards for different purposes like spreading cost of large purchase or repaying debt, but don’t own more than five cards.
The Problem with Several Cards
If you have several cards with high credit limits, lenders may be hesitant to let you borrow more. This is because of the possibility that the amount of credit you have could increase significantly, especially if you went on a shopping spree. This could put you at risk of failing to repay your debt.
Before you start cancelling cards, examine all of them and check their limit. Make sure you have access to sufficient emergency borrowing. Then, speak to the credit card company about cancelling and see if it will offer anything to make you stay. Sometimes, providers may lower the interest rate or lower the fees for moving your balance.