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INSIDER SECRET: If you’re paying a card’s annual fee but not getting value from it, you can often downgrade to a no-annual fee card and keep your account active!
As long as you’re responsible with your credit and pay your bills in full and on time, opening travel credit cards and earning their welcome bonuses is a great way for you to quickly boost your miles and points balances. It’s also a good way to keep your wallet up-to-date with the best cards for your daily spending!
But what do you do as you collect more and more credit cards? If you really dive into this hobby, it’s inevitable that you’ll get to the point where some cards just won’t be used as often as others. So do you go cold turkey and stop using those cards altogether? Or should you just close the accounts?
You should do neither. It’s best to keep your credit cards active, instead!
I’ll explain why this is, and share 2 strategies I use to easily manage my own wallet of 18 credit cards.
Keep Your Travel Credit Cards Active – It’s Good for Your Credit Score!
So the million dollar question: Why is it important to keep your credit cards active? Well, if you don’t use your credit cards at least once every several months, your bank just may decide to cancel your card. And that could slightly affect your credit score, as two of its factors are:
- Credit utilization
- Length of credit history
When a card is closed, it can potentially increase your credit utilization (the percentage of available credit to the money you’ve yet to pay off on your cards). Generally speaking, the lower your credit utilization, the higher your credit score will be! So for example, if you’ve got a balance of $1,000 out of $5,000 in total credit card limits, you would be at a 20% credit utilization ratio ($1,000 / $5,000). However, if you closed a credit card with a $2,000 credit limit, your utilization would skyrocket to 33% ($1,000 / $3,000)!
In other words, whether you close a card yourself, or if a bank closes it from lack of use, your credit score will be slightly (and very temporarily) dinged.
Note: The exact time frame that a bank may close your card varies, but many people in online forums recommend using your card at least once every 6 months to prevent the bank from closing your card for inactivity.
One very important detail is that if you’re paying a card’s annual fee and not getting value from the card, you should NOT pay the card. Instead, try downgrading the card to a no-annual-fee version (you can read this post for instruction on downgrading cards). If you can’t do that, you should definitely cancel.
Personally, as long as a card does not carry an annual fee, I like to keep the card open so that I can retain those months of positive payment history on my credit report.
2 Easy Ways to Keep Those Cards From Being Closed
Staying organized with all of your cards is one thing. Making sure they’re all being used is another. Here’s what I do to make sure all my cards continue to see activity!
Fun and Easy Way: Reload Your Amazon Gift Card Balance
I normally shy away from gift cards. I find myself taking forever to find a reason to use them, and by the time I get around to it, voila…I’ve lost the card. I can’t tell you how many Starbucks gift cards I’ve lost over the years because I only step inside their stores maybe once a year!
But Amazon is a different story. I shop a TON at Amazon. It’s the first place I check when I need to buy something, even if I know I can walk down the street to the store and pick it up! Plus the ability to buy digital gift cards is great because I know I won’t lose the gift card, and because I shop a lot at Amazon, I go through my gift card balance in no time at all.
Systematic Way: Use Your Card for Small Recurring Purchases, or Just Rotate them In and Out of Your Wallet
Another easy way to ensure your cards are being used (though it takes more organization) is to schedule a small recurring bill to be charged to the card every month. Streaming services like Hulu, Netflix, Spotify, or Apple Music are great choices because those bills are typically in the $10 to $20 range.
Another method is to simply rotate your seldom-used cards into the front of your wallet every now and then, using them for small purchases whenever you’re out shopping. You could use them when you’re buying a coffee at Starbucks, or picking up some snacks at your local gas station or grocery store.
If you’re like me and shop frequently online, you could also leave a sticky note and/or your entire wallet of credit cards near your computer. This way, the next time you reach for a card to buy something online, using a different credit card will be at the front of your mind!
The benefits of keeping your cards open seriously outweigh the downsides. By keeping your cards open, you’ll retain all the months of your on-time payments. Keep doing this and the sky’s the limit for your credit score!
If you’re worried about how challenging it might be to keep track of all of your credit cards, you can try using these 4 tips. And check out this post for how to downgrade your cards instead of canceling.
Let us know if you juggle multiple credit cards, and what your strategies are for keeping them active! And subscribe to our newsletter for more helpful info like this.