Four Reasons to Cancel Unused Credit Cards

If you have strong credit and a healthy income, you may also have a series of open credit lines from major credit companies. Having unused credit cards can be an asset to you when you're foreseeing large expenses that you don't have cash for, and low interest rates can make your purchases worthy of a credit card expense. However, there are some situations where keeping open credit lines from credit cards can work against you. Here are four reasons to cancel those unused credit cards:

Cancel Unused Credit Cards If You're a Compulsive Spender
Compulsive spenders need the security of having available cash or credit on their hands, and this can quickly lead you towards overwhelming debt if it goes unchecked. While having the open credit lines may feel like a 'net' for your habit, you may be making the problem worse. Don't give yourself the opportunity to let your compulsive spending habit get out of control by simply reducing the available cash and credit you have.

Cancel Unused Credit Cards If You're Shopping for a Loan
Loan underwriters do take your open credit lines into consideration, and while it's good to keep your debt at 50% below your maximum credit line, too much open credit can reflect negatively on you. Some underwriters may perceive this as simply having too much potential debt; should you go on a shopping spree and max out your credit cards, you would no longer qualify for your loan.

Cancel Unused Credit Cards to Avoid Paying Annual Fees
Why pay for credit cards that you're not even using? Skip the annual fees and minimum balance requirements (if any) completely and cancel them. If you want to open an account later, you may be offered a reduced rate or enjoy a discount with a waived fee instead.

Cancel Unused Credit Cards If You're Spending Too Much at One Retailer
Many store credit cards encourage you to keep shopping with discounts for cardholders, special sales, and online discounts - as long as you just charge it. Review your expenses for the last few months and consider whether you're shopping exclusively at just one or two stores simply because you have a credit card (and paying off the balance before finance charges accumulate). You may be able to find similar deals or better if you shop outside of your 'comfort zone' and will not need the credit card at all.

Even when you decide to cancel unused credit cards, it's important to keep your longest standing accounts open when you can. Having open credit on at least 1-2 accounts for over 5 years can dramatically boost your credit score; so cancel all your newest credit cards first, and space them out over a period of months to make the biggest impact on your credit score.