No. of Recommendations: 0
I only use two credit cards. One is from my main brokerage account (low interest rate; I'm not sure what it is, since I pay it off every month). The other is from my local bank; it allows me to withdraw cash from their ATM, without a fee. Like the other, I pay it off whenever necessary (I seldom use cash).

I also have a Target card, which I got to obtain a 10% discount on a Target purchase. I never use this card. I also have an Amazon.com card. Ditto.

Is it harmful to my credit to carry these inactive cards? Should I destroy them? Should I contact the issuers, and formally inactivate them?

Wendy
Print the post Back To Top
No. of Recommendations: 0
I also have a Target card, which I got to obtain a 10% discount on a Target purchase. I never use this card. I also have an Amazon.com card. Ditto.

Is it harmful to my credit to carry these inactive cards? Should I destroy them? Should I contact the issuers, and formally inactivate them?


Assuming you have no near-term needs to initiate new borrowing, I favor contacting the issuers and formally cancelling the accounts.

From a conservative standpoint, this means two fewer cards that have some miniscule amount of risk of being used fraudulently. You don't have them, they can't bite you.

From an aggressive standpoint, it means that you no longer have accounts with Target or Amazon, and you can sign up for a card from them to get the next 10% discount they offer that way. Just don't do this so often that it messes up your credit score when you really need to borrow money.

Patzer
Print the post Back To Top
No. of Recommendations: 0
4 credit cards are not unreasonable.

What is your credit history on the accounts? Do both of your preferred accounts report your credit limit or only your current balance?

If either the Target or Amazon are your only long term credit account, it would be worth considering not cancelling it. If either of your preferred cards are playing games with not reporting your credit limit, they are hurting your FICO score and maintaining the additional cards helps with the overall credit used ratio.

Debra
Print the post Back To Top
No. of Recommendations: 1
Inactive cards do not hurt you at all. To the contrary they can help you.

In fact, cards that are inactive more than 6 months aren't counted at all for anything. So closing them or keeping them laying around is identical. The only reason to cancel one is 1) if you feel like it, or 2) if they charge you a fee (definitely cancel it then!).

One big factor in your credit score - probably after length and on-time credit history - is utilization ratio. That is, your average balance is $X and your total credit limit is $Y. X/Y is your utilization ratio. The lower that ratio, the more responsible you look credit wise.

So if you have some inactive cards, you could consider using them once every 6 months to keep them active. Then, for the 5 other months, it adds to your Y, but not your X. And if it's just one small charge, even that one month you used it, it still helps your utilization.

A particular incentive to do this is if it's your oldest card. If this is the case, keeping it 'active' not only helps your utilization, but also extends your credit history further back, which also helps your score.

But if you don't want to bother with all this stuff, just close them. If you continue to pay responsibly, on time, and use a reasonable amount of your credit, you'll be just fine.
Print the post Back To Top
No. of Recommendations: 1
In fact, cards that are inactive more than 6 months aren't counted at all for anything. So closing them or keeping them laying around is identical.

This is just flat wrong with respect to FICO. Closed accounts can impact FICO (closing a card doesn't remove past bad payment histories, they age off just like any other negative) and FICO do not ignore inactive cards. I have talked to the people from Fair Isacc and they explicitly deny this.
Print the post Back To Top
No. of Recommendations: 0
Thanks to everyone for the responses.

<closing a card doesn't remove past bad payment histories, they age off just like any other negative>

This is useful information. However, in my particular case, I have never used either of the inactive cards at all.

Wendy
Print the post Back To Top
No. of Recommendations: 0
<4 credit cards are not unreasonable.

What is your credit history on the accounts? Do both of your preferred accounts report your credit limit or only your current balance? >

I pay off all credit cards immediately. I don't carry a balance on any card.

My preferred card does report a credit limit. I just recalled that my second preferred card is a debit card, not a credit card (draws directly from my checking account).

I have never used the two secondary cards, that I am asking about, ever.

Wendy
Print the post Back To Top
No. of Recommendations: 0
My preferred card does report a credit limit. I just recalled that my second preferred card is a debit card, not a credit card (draws directly from my checking account).

I believe in keeping at least two credit cards (Visa, MC or Discover). Things go wrong and usually at the worst time. Also, terms of the account can change with limited notice. If you have two long standing account, you have the flexibility of terminating one of the accounts at any time.

Debra
Print the post Back To Top
No. of Recommendations: 0
This is just flat wrong with respect to FICO. Closed accounts can impact FICO (closing a card doesn't remove past bad payment histories, they age off just like any other negative) and FICO do not ignore inactive cards.

You are right. I did not mean to imply that it would get rid of negatives like late payments. I don't make late payments so it didn't cross my mind.

However, I stand by the rest of it. Utilization ratio does not count inactive cards. I have heard this in numerous places including Clark Howard.

I guess one thing I'm not sure about, does having an inactive (as opposed to closed) card count that as part of your credit history? I thought the answer was no, but I guess I'm not clear on that.
Print the post Back To Top
No. of Recommendations: 0
The one thing I can think of is to look at the rewards you earn from using the card, and since you pay in full each month, use the card with the best reward.

Four cards is a drop in the bucket. Nothing to really worry about, and might come in handy in an emergency situation.

- Lan
Print the post Back To Top
No. of Recommendations: 0
I guess one thing I'm not sure about, does having an inactive (as opposed to closed) card count that as part of your credit history? I thought the answer was no, but I guess I'm not clear on that.

Given that closed accounts feed into history I would assume inactive ones do too.
Print the post Back To Top