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Think Twice before Closing Your Unused Credit Card

It is a common problem for most of those, who own more than one credit card, to make a decision whether they would give up unused credit cards or keep them. With only a tiny section of people having good knowledge about finance, it is not hard to imagine that they can never take the right decision. I too faced the dilemma of whether to keep it or give it up. However, I decided to keep it with me after I discovered the dire consequences of surrendering the credit card. You cannot deny that it is an important piece of your credit history and keeping the card will benefit you instead of doing harm.

Credit Card

Now let me expose you to some not-so-encouraging consequences of credit card cancellation.

Impact on Payment Records

Account closure will adversely affect payment history of the credit card account. Payment history plays an important role in determining credit score. However, you will not feel the impact immediately as even if you close your credit card accounts, these will not get removed outright. However, those will get eliminated in a decade, giving a heavy blow to your credit history.

Loss of Credit Records

It could be the bigger lashing of closing an unused credit account. If a long history is associated with your credit card, losing it will leave bad effects on the credit history. It makes no sense to lose a lengthy credit history if you are not forced by any unavoidable reason to do that.  The critics claim that closing the oldest credit card will heavily impact your credit card history in the most negative way. Your credit score is determined by a number of factors including length of your credit history. That explains why you should keep the oldest credit card open, otherwise it will badly hit your good score.

Disrupting Ratio of Balance to Limit

This is the worst hit thing in the wake of credit card closing. The ratio is taken into consideration by the credit agencies while determining your credit score. This contributes 30% to determination of your credit points. If you have just a couple of cards and each has a considerable limit, closing one of them will seriously affect this matrix.

A good hang of how your decision to close credit card will affect your financial health is extremely important. And without familiarizing yourself with the consequences of your financial decision, you will hardly understand why it is never a sensible step to close your unused credit card.

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