Yahoo Finance I’m a Financial Expert: Here’s What You Should Do With Your Old Credit Cards
There may come a time when you no longer have a use for a credit card, since it expired, you found a better one or you chose to cancel it for another reason. Whatever the reason, you’re unsure of what to do with this card now.
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GOBankingRates spoke with David Ciccarelli, a financial expert and CEO of Lake, to get his advice on what to do with old credit cards so that you don’t have them sitting around in a drawer.
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Decide What You’ll Do With the Credit Account
If you’re disposing of a credit card because it expired, you likely won’t have to worry about implications on your credit, since you were issued a new card. However, if the card is still active, you’ll want to decide what to do with it. Just because you don’t use a credit card doesn’t mean the account has been closed.
You have some options to consider:
Close it. You can close this credit card account, so you don’t have to worry about possible theft or fraud.
Let it be. If you’re worried about any impact on your credit score, you can let the account stay open while you stop using the card, as long as you store it safely.
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Think Before Cutting Them Up
“The traditional advice is to cut up your card once you’ve activated the new one, but that’s not always possible,” Ciccarelli said. “For my personal expenses, I’ve been carrying the same Visa travel credit card for more than 20 years. It now comes as a metal card, and I make a point of returning the metal card to the local branch.”
While you could cut up traditional expired credit cards, you won’t always be able to do this with new ones. This is why it’s essential that you contact the issuer to see what they suggest when it comes to disposing of a credit card that you no longer use.
Return the Credit Card
“For business expenses, I tried two American Express cards,” said Ciccarelli. “There was an airline-branded card that I ultimately decided to cancel, because I traveled enough that I already received the benefits the card offered. Since the airline card was metal, I was told when I canceled that an envelope would arrive and that it would be helpful if I could return the card to American Express. Sure enough, the pre-paid envelope arrived a couple of days later, and I dropped it in the local mailbox.”
The process for getting rid of old credit cards has changed, so you want to ensure that you correctly dispose of the card.
Check Your Credit Report
Before you do anything with your credit card, you want to review your credit report to ensure the information is accurate. Your credit report will contain all of your critical financial data. It will benefit you to go through everything so there aren’t any potential issues in the future.
Consequences of Closing Your Credit Account
It’s important to consider the consequences of closing a credit card. Disposing of an expired credit card won’t affect your credit. However, if you decide to close an account, here are a few considerations, according to Equifax:
Canceling a credit account could impact your debt-to-credit utilization ratio, since you have less credit available. Lenders want to see a low ratio when it comes to your debt based on how much credit is available to you.
Closing down your only credit card could impact various credit types, hurting your credit score.
Closing a credit card is a fairly serious financial decision, because it could impact your credit score. If you’re in the market to apply for a loan to buy a new home or a vehicle, you may want to think twice about the timing — you don’t want potential lenders to be concerned.
Final Steps for Your Old Credit Cards
Before you cut up or return those old credit cards, here are a few final steps to better protect yourself from any possible financial issues:
Pay off the outstanding balance. If there’s a balance on this card, you have to pay it off so that you don’t have any issues with the credit bureau.
Inform the credit card company. You want to contact the credit card company if you plan on not using the card to close the account properly.
Stop any automatic payments. You’ll want to double-check your credit card statement to determine if any automatic subscription payments need to be changed first.
These steps will ensure your old credit cards don’t cause you any financial issues in the future. You want to dispose of those credit cards correctly so that they don’t come back to haunt you.
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This article originally appeared on GOBankingRates.com: I’m a Financial Expert: Here’s What You Should Do With Your Old Credit Cards
