What To Do With Old Unused Credit Cards
Paul11710 asked a good question in the comments of my post about credit card strategies and that was my take on what you should do with old credit cards that have outlived their usefulness. Back when 1999, my credit card of choice was the good ole Discover Card because it gave me 1% cashback and I could take my rewards and double them for a Staples gift certificate - effectively giving me 2% cashback, a windfall compared to the cashback offers of that era. In 1999, I was in college and doing a lot of the rebate arbitrage plays on eBay where I’d buy something, submit the rebate, and resell on eBay for a modest profit. I stopped using the Discover Card when the cashback-to-gift-certificate multiplier dropped from 2x to 1.5x but I’ve always kept the card in my desk just in case.
Why don’t I just cancel it? For various cards that I’ve applied for and stopped using within the last three years, I cancel them outright. The reason is the average age of your credit lines is a component of your credit score and so a card that’s 7 years old will only increase my average age whereas a card of under 3 years old will decrease my average age. Take a look at all of your credit cards and find out your average credit card age, mine is somewhere in the neighborhood of 3 years, and cancel the ones that are younger that you don’t use and keep the ones that are older and you do. If you have multiple cards from the same company, ask to roll your younger credit limits into your older card. Some cards will do this, some will not (Discover will not, at least for me).
Be very careful of how many cards you keep in your desk and keep a good record of them in the event someone steals those cards (or somehow gets access to them). I periodically check my Discover card account just to be sure that there aren’t any unauthorized charges since I don’t use the card, it’s very easy for someone to buy something and have it go unnoticed until a statement arrives (which is okay from a liability perspective but I want to be diligent and not be surprised).
8 responses to “What To Do With Old Unused Credit Cards”
rich responds:
Posted: October 24th, 2006 at 2:40 pm
“If you have multiple cards from the same company, ask to roll your younger credit limits into your older card.”
I have 3 Citibank credit cards. If I ask them to combine the credit limits on my 2 newest cards to my oldest card, is that the same as cancelling the 2 newest cards? And if so, won’t that hurt my credit score?
jim says in reply:
Posted: October 24th, 2006 at 4:27 pm
Yes, it will hurt (if your average age decreases), but it will hurt less than canceling the cards outright because your overall credit limit will remain the same (thus your percent utilization won’t change). It’s all on a sliding scale of goodness to badness.
Randy responds:
Posted: October 24th, 2006 at 5:08 pm
This is off topic, but it brings up a question I’ve often thought about. How “good” does a credit score need to be? My sister-in-law runs the loan department of a branch at National City. She claims a score of over 730 offers all of the benefits that a perfect score offers (840?)
Anyone know this for sure? That would certainly influence my attempts to arbitrage credit cards or open and close accounts regularly.
jim says in reply:
Posted: October 24th, 2006 at 5:29 pm
Randy, I’ve heard that same number (730) used as the top rung of the ladder as well from other sources (though I doubt there is any better source than someone who runs the loan department at a reputable bank).
Mike responds:
Posted: October 25th, 2006 at 8:34 am
Another factor in your credit score is your used credit vs. available credit. From what I’ve heard it’s a pretty big factor too–if you’re maxing out your credit your score is going to be a lot lower than if you’re hardly using any. So if you keep your old credit cards active (but cut them up so you won’t use them), you’d be improving your score. Getting your existing cards to raise your credit limits can give a similar benefit, and generally you can ask for an increase every 6 months or so.
Also, until you’ve established a good credit rating, having additional credit lines will also help your score. If you have lots of cards that’s not a benefit, but for someone relatively “new” in terms of their credit rating, adding lines may help.
Rob Carlson responds:
Posted: October 26th, 2006 at 12:31 pm
A safe deposit box is a great place for unused plastic. I know my bank offers boxes for $55/yr. A steal at twice the price.
Free Money Finance responds:
Posted: October 27th, 2006 at 6:21 am
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