Should I Stop Using My Credit Card?

Is it bad to completely stop using my credit cards? 

Credit card companies generally focus on your balances and whether you pay on time. If you stop using a card, there is a risk that your issuer may close it, and that may affect your credit score by reducing your available credit. The reality is, that some credit card companies will close cards that don’t charge an annual fee and are not used and it will hurt your credit score. Your score is heavily weighted by your available open credit line and the percentage of month to month charged on those lines. With most cards without a balance you should use them at least 1-2X/yr. to keep them open.

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For example, if you have $20K in credit cards and $10K in debt. Your use is 50% and your FICO score will be lower. If you don’t use a card and the company closes a $5K card, your available credit drops by 25%. That means you’re using 67% of your credit. Your score takes a huge hit.

You don’t need to pay interest to keep a good score, but keeping it below 10% use helps you have the best score. Pay off your cards every month and use them on occasion.

Know Before You Swipe

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It’s unwise to keep your old credit cards that you may not use anymore, open. Let’s say that a charge is made to the account for an annual fee, a recurring subscription or even a fraudulent charge, and you don’t realize what’s happened and the bill could go unpaid. That could hit your credit score in a negative way. 

To avoid this kind of problem, you may want to set up text messages or email alerts to notify you if there is activity on the account.

Credit cards are a great resource if used responsibly. Never carry over a balance, and you’ll be fine. Don’t treat it as a “debt” or “income”, treat it like a debit card that you pay at the end of the month.

Author: Luke Peters