Why You Should Cancel Unused Credit Card Accounts

There are now more live credit cards in issue in the UK than there are people, with recent figures showing each adult carries an average of 1.4 cards. When you consider that large swathes of the population don't or can't use credit cards, this means that some people must be holding several.

Promotional features such as introductory balance transfers or cashback deals positively encourage people to sign up for new cards, and over time it can be easy to end up with a wallet packed with plastic, even if most of it is unused.

The easy option is to let your old accounts linger on with a zero balance, maybe keeping them in reserve for a rainy day, but this is a bad idea for four reasons.

Temptation to Spend

Having multiple unused cards means that you have a potentially huge line of credit open to you, and with this can come the temptation to spend. Even if you only run up a small debt on each card, spread this across several accounts and it can soon become a problem. Canceling your old cards neatly removes this danger.

Your Credit Rating

Having large line of credit open can also damage your credit rating, as lenders perceive this as a risk factor. This will make it harder to be approved for a card with the latest and greatest features, so you could be stuck with an uncompetitive card. Cleaning the cobwebs off your credit file by closing unused accounts will make the best buys more accessible to you.

New Customer Offers

Many introductory deals require you to be a new customer for you to take advantage of them - but this means a new customer to the bank, not just to the specific card. When you consider that the major banks operate dozens of different cards under different brand names, it's easy to see that having a collection of defunct yet open card accounts makes it harder to be a new customer for any bank. When you close your account, you're typically seen as a new customer again after a period of 12 months, meaning you can access the tempting introductory deals once more.

Dormant Accounts and ID Theft

Finally, having open but unused accounts can present an opportunity for ID thieves. If you don't use a card or carry a balance on it, then you're less likely to check your statements and so may miss spotting any fraudulent activity. More seriously, if you move home you may forget to inform the card issuer (out of sight, out of mind), meaning that mail regarding the account may be sent to your old address, potentially giving identity thieves a starting point into exploiting your financial identity. Having your unneeded accounts closed removes this possibility.

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