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Should you cancel unused credit cards?

What happens if you end up with a bunch of credit cards you don’t use any more? Should you cancel them? Or is it better to leave the accounts lying dormant?

What happens if you end up with a bunch of credit cards you don’t use any more? Should you cancel them? Or is it better to leave the accounts lying dormant?

Written by
Sajni Shah
Consumer money expert
14 APRIL 2022
5 min read
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Should you cancel unused credit cards? 

There are lots of reasons you might find yourself with a credit card you no longer use. Maybe the 0% interest period that attracted you in the first place has ended or you’ve found another card that offers a better deal. Or it could simply be that you have too many credit cards and want to streamline your finances. 

In any case, should you cancel your old cards? Well, there are arguments both for and against. Keeping your old cards might improve your credit rating. But there’s a risk you’ll overspend. So, it depends on your circumstances – and whether you can resist the temptation to splurge.

How many credit cards should you have? 

There’s no hard-and-fast rule that says how many credit cards you should or shouldn’t have. But it’s worth remembering that the more you have, the more difficult it will be to manage your finances. And if you build up too much debt, it could affect your credit score – along with being a huge source of stress.

The dangers of having too many credit cards 

It can be tempting to take out lots of credit cards, particularly if they offer benefits like store discounts or reward points.

But having too many credit cards also has its disadvantages. For example: 

  • it’s easy to spend more than you can afford
  • managing your accounts becomes complicated
  • there’s a bigger risk of theft or fraud.

What effect do unused credit cards have on my credit report? 

Having said that, there can be benefits to having multiple credit cards, in that it shows lenders that you can manage lots of accounts. Assuming you never miss payments, it will also help prove that you’re a trustworthy borrower. 

Spreading credit across multiple cards may also impact your credit score less than maxing out one card, although this will depend on the scoring method being used. 

When it comes to credit scores, it’s worth remembering that you don’t have just one. Lenders judge by different criteria, so what impresses one might have no effect at all on another.

Does closing a credit card lower your credit score? 

It could do if the amount of credit you’re using across all your cards goes over 25%-30% of the total credit available to you. This means you’ll have a higher credit utilisation rate, which could raise a red flag with lenders. However, the most important thing to remember is that you always need to manage your money and make your payments on time.

Will cancelling unused credit cards improve my credit score? 

It may do. While closing credit cards could increase your credit utilisation rate, which could negatively impact your credit score, having multiple cards open increases the chance of you racking up large debts. Lenders will see this as a risk and may not lend to you because of it. 

If you do decide to cancel a credit card, there’s an argument that it’s better to cancel new cards over old ones. That’s because the older the card, the more of an impression it will leave on your credit rating.

When should I cancel unused credit cards? 

There’s a few situations where it’s good to cancel a credit card you’re not using, such as: 

  • you’re paying an annual fee
  • you’ve experienced problems with debt
  • the card has a high interest rate.

Another reason is the risk of fraud – it’s hard to keep tabs on accounts you’re not using. And if you’re not using your card, there’s a chance you won’t notice if someone takes it on a spending spree. 

You may even be tempted to go on your own spending spree. When you’ve access to funds, it’s tempting to use them. Closing unused credit cards makes it easier to keep your finances in check. 

If your credit card company charges an annual fee, it’s worth cancelling so you can save that money. Another reason to cancel is that you may find it spurs your credit card provider into offering you a better deal.

How do I cancel unused credit cards? 

To cancel your credit card, you’ll need to contact your card provider to let them know that you’re closing your account.

You can do this either by phone or in writing – check on the provider website to see which they prefer. You just need to make sure you’ve paid off the outstanding balance or transferred it to another card.

Top Tip 

Beware: cutting up your credit card, cancelling your Direct Debit or simply not using the card won’t close your account. There’s also a risk you could miss a payment, which could have serious consequences.

When shouldn’t I cancel unused credit cards? 

There’s a few circumstances where you might find you’re better off keeping your old credit card. It may be that: 

  • it’s your only credit card
  • it’s the oldest credit card you have
  • it increases your credit utilisation (you’re using less of your available credit).

Frequently asked questions

How do you close a credit card with a balance?

You can’t close your account until you’ve paid off your balance. If you can’t afford to do that, one option is to move it to a balance transfer credit card. This lets you transfer debt from one card to another, usually to take advantage of 0% interest rates. There may be a fee for transferring your balance and you’ll need to make sure you don’t miss any payments, or you may lose the 0% rate.

What is credit utilisation?

Credit utilisation is a term for describing how much of the credit available to you that you use. So, if you have a credit limit of £2,000 but your balance is £500, you have a credit utilisation of 25%.

What should my credit utilisation be?

Ideally, you should try to keep your credit utilisation below 30%. This shows that you have control of your finances and don’t rely on credit too much.

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