Editorial Policy

Turn that unused retail card into a credit builder

Erica Sandberg

February 3, 2015

QHi Erica,

Is there a length of time I have to keep a credit card open? I got a Bloomingdale's card for Christmas shopping, but it turns out that I really don't need it now. (I paid it all off, if that matters). I have another credit card that I can use for everything, and I get points with it. Thanks in advance! –Sarah

ADear Sarah,

There is no fixed amount of time that you are required to keep a credit card open. However, whether it behooves you to cancel is another matter.

Like millions of people, you succumbed to the appeal of the deal. I'll bet you entered that store during the height of the shopping season, went to pay for a costly armload of stuff, and the cashier filled you in on the awesome discount you'd get by opening a credit card right that minute. Hard to say no under those circumstances! Ask Erica

And you probably did benefit, as many of these retail cards are equipped with enticing perks, such as an instant 25 percent off that day's haul or coupons and special events not available to non-cardholders. (Out of curiosity, I checked out the details for the Bloomingdale's American Express card and was impressed that it offers a free meal after dropping just $100 at one of its restaurants — pretty cool if you eat there.)

Here you are now, though, realizing that you may not want or need to shop at this retailer in the future. It seems silly to have an account when you won't ever use it again. If that's the case, you're right. In fact, if you don't charge with it in the future, the company will eventually cancel the account on its own. How long that will be depends on its particular policy, but a year of nonuse can often trigger a suspension or closure.

Still, think carefully before making your final decision. You have one credit card now, which is great, but if you want to build your credit rating, a retail account can work to your advantage. Credit scores, such as the FICO, factor in a history of using a variety of credit accounts. If you regularly charge with both cards while continuing to pay on time and keeping the debt to a minimum, your scores will increase. Higher scores lead to credit products with preferable terms, such as especially low interest rates and even better rewards programs than you may have now.

(You can check your FICO score for about $20 per credit bureau at MyFICO.com. Want to understand more about what's behind your score? Pull your credit reports for free once a year at AnnualCreditReport.com.)

In the event that you believe the card is completely unnecessary (maybe the store is too far from you, making it impractical to visit, or you just don't care for the merchandise), feel free to give the issuer a call and cancel the account. As long as the balance is at zero, which you say it is, you should be able to do so right away.

What will it do to your credit? Not much, probably. Presuming you opened it in December and you cancel it in January or February, it will have been listed on your consumer credit reports for a short while. If you have an established pattern of perfect payments and carry no debt with your other card, your rating will be fine.

However, if you have a high balance on your other card, and you close the Bloomingdale's card, that can affect your credit score. Here's why: FICO weighs 30 percent of its score on something called your credit utilization ratio. This means that the higher your balance (some say over 30 percent of your available credit), the harder your score is hit. That's why it's so important to keep the balances for all of your cards as close to zero as possible. And if you have a balance on your other card and you keep the Bloomie's active? That will benefit your score.

In the future, be more thoughtful before entering into any of these credit contracts. Everything you do with the accounts will show up on your credit reports, beginning with the applications. Only apply for cards that you will probably qualify for (which will prevent excessive inquiries from reducing a credit score) and for those that you'll really end up using.

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