What to Do With Your Unused Credit Card?

Unable to decide what to do with your unused credit card? Close it or keep it? Before you decide, you must consider a few essential points. Read on to know what you should do with your unused credit card.

When to Keep an Unused Credit Card?

At times, keeping an unused credit card could be a wise choice. Let’s understand why:

• It helps manage cash flow issues during a job change, while expanding a business or moving to a different country, etc.
• It helps when you are new to building credit.

When to Close Your Unused Credit Cards?

You can close your unused credit card in the following cases:

• When there are no additional perks like cashback or reward points on your card.
• If the annual fee of your credit card is high and doesn't justify the card's benefits.
• When you have multiple credit cards.

Also Read: What are Finance Charges in Credit Card?

What Are the Impacts of Cancelling Your Unused Credit Card?

The impacts of cancelling your unused credit card are:

1. Affects Credit Utilisation

When you plan to cancel your inactive credit card, it may affect your credit utilisation ratio. Credit utilisation ratio is the ratio of the credit used to the total available credit limit. Cancelling an unused credit card reduces your available credit and may increase your credit utilisation ratio. This can impact your credit score and result in high interest rates on loan in future.

2. Reduces the Average Age of Accounts

Closing an unused credit card account reduces the average age of your accounts, which is a crucial factor for determining your credit score. The length of your credit history impacts the determination of your credit score by almost 15%. Hence, cancelling one unused credit card lowers this average age, reducing your overall credit score significantly.

3. Affects New Credit Inquiries

Another factor to consider before cancelling your unused credit card is the effect of new credit inquiries on your credit profile. When you close an unused credit card and apply for a new one, you add hard credit inquiries to your credit report. These inquiries can also contribute to a reduced credit score.

Also Read: Personal Loan or Credit Card Loan - Which One Should You Take?

To Conclude

Deciding what to do with your unused credit cards depends on your circumstances. If the card lacks any perks or has a high annual fee, and if you hold multiple cards, closing it may be the right decision for you. However, if you anticipate cash flow issues or are new to building credit, keeping it open may be the right option. It is essential to weigh-in the pros and cons carefully before making a decision.

Frequently Asked Questions

1. Is it better to close an unused RuPay credit card?

An unused RuPay credit card may not cause you any harm. Closing credit accounts may impact your credit score.

2. What happens to credit cards if not used?

If you have not used a credit card for a long time, typically more than 12 months, the credit card issuer may close your account.

3. If I don't use my credit card, will I be charged?

If your credit card has an annual fee, you will be charged whether you use it or not. You may check the check the billing statement for the charged fee.

4. How to Apply for a Poonawalla Fincorp IndusInd Bank eLITE RuPay Credit Card?

You can apply for Poonawalla Fincorp IndusInd Bank eLITE RuPay Credit Card using two methods mentioned below:

1. By visiting the Poonawalla Fincorp IndusInd Bank eLITE RuPay Credit Card page and clicking on ‘Apply Now’.

OR

2. By visiting the IndusInd Bank website.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply