What to Do with Unused Credit Cards: Keep, Cancel, or Downgrade?


Do you have unused credit cards taking up space in your wallet, or gathering dust in your junk drawer? Most of us do! Wondering what to do with unused credit cards? You’ve come to the right place!

What to do with unused credit cards

Your first instinct would probably be to close out the account, shred it, and be done with it. But is it bad to close an old credit card? It can be. What to do with an unused credit card really depends on the situation.


What to Do with Unused Credit Cards

Essentially, you have three options:

  1. Do nothing. Keep the card open, put it in a sock drawer, and forget about it.
  2. Close the account, and shred the card.
  3. Call in and downgrade the account to a lower-level card, that doesn’t have an annual fee.

There are situations where each of these steps could make sense.

When it Makes Sense to Do Nothing

If you have an unused credit card that’s open, has no annual fee, and is one of your older credit accounts, it may make sense to just keep the account open even if you’re not using it.

This is because old accounts help increase your Average Age of Accounts, which is a significant factor in your credit score. In this case, if a card is one of your older accounts, closing it could actually hurt your credit score.

And of course, if there’s no annual fee on the card, there’s no harm in keeping it open. Just make sure you leave it in a safe place!

When it Makes Sense to Close a Credit Card

If you have an unused credit card that is not one of your older cards, and that has an annual fee, it may make sense to close the card account.

If you have several credit cards and this particular card is not one of your oldest, closing it won’t significantly impact your average age of accounts. So, it’s safe to close it. However, you may want to think twice if you carry a balance on other cards – see the section below on credit utilization for details.

And if the card has an annual fee, there’s no reason to be paying for it if you’re not actively using the card benefits!

When it Makes Sense to Downgrade a Credit Card

Sometimes, there’s a third option. If you have a card that’s one of your older accounts and that has an annual fee, you can downgrade the card to one that doesn’t have a fee.

This essentially keeps the card account open in the eyes of the credit bureaus, but allows you to change the product to a no annual fee credit card.

Most credit card issuers allow this. You’ll usually need to call in and ask for a “product change” or something similar.


Why You Should Usually Leave Unused Credit Cards OPEN

There are several options for dealing with old, unused credit cards. But generally speaking, it usually makes the most sense to leave unused cards open. Why?

Closing an old credit card can affect your credit score negatively. There are two possible ways that this comes into play:

  1. Closing an old account can lower your average age of accounts, which makes up about 15% of your FICO score
  2. Closing an account can affect your credit utilization, which makes up 30% of your FICO score

The average age of accounts is simply the average age of all your credit accounts. Closing an older account can slightly lower the average, which may lower your score.

Closing Credit Cards & Credit Utilization

Credit utilization is a bit more complex. Essentially, it refers to the ratio of how much credit you are using compared to how much you have available to you. So, let’s look at an example:

  • You have 4 open credit card accounts, with a combined credit limit of $12,000
  • You carry a combined debt balance of $3,000
  • Right now, your credit utilization is 25%, as you are using 25% of the credit available to you.

But what if you closed one of those cards? This would eliminate part of your credit line, and lower your combined credit limit to $9,000.

Now, with that same debt of $3,000, you’re using 33% of your available credit, and your credit utilization has increased significantly. This will almost certainly lower your credit score.


Before You Close a Credit Card…

Before you close any sort of credit account, consider the following:

  • Many credit card issuers will waive annual fees if you call and ask nicely
  • Some will require you to pay the fee, but will issue bonus rewards to make up for it
  • Closing old accounts can negatively affect your credit score
  • Closing any account can negatively affect your credit score if you carry a balance
  • If you do close an account, make sure to destroy the card and dispose of it in a secure manner

Hopefully this guide has helped you figure out what to do with unused credit cards! If you have any questions, drop a comment below! Lastly, if you are trying to decide what to do with an old credit card, it may be worthwhile to give your credit card provider a call to discuss your options.


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