Credit Cards

Should you cancel store credit cards you opened over the holidays?

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The quick answer is that it depends on what benefits those cards give you.

Key points

  • Having more cards can make it easier to spend more.
  • Store cards can affect your credit, but usually not much.

Between the gift giving and galore sales, many people spend a lot more money in retail stores during the holidays compared to the rest of the year. If you made a lot of purchases in person this past holiday season, you may have been tempted to sign up for a store credit card.

A store credit card is a card that you can use with a specific retailer. These cards often come with incentives like rewards points on your purchases that can be redeemed for store credit. And many store credit cards offer an initial discount for signing up.

For example, you may have been offered a 10% discount on your purchase for opening a new store card. If you’re spending $300, that’s a lot of savings. But what if you don’t plan to use your store cards often? Should you close the accounts you recently opened? Ask yourself these two questions to find out.

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1. Do my store credit cards open the door to more spending?

If you’re a disciplined spender who sticks to a budget, then having a few extra store credit cards may not be a bad thing. If you use them minimally, or limit yourself to charges you can easily afford, then there’s nothing wrong with keeping those cards. Plus, by keeping them, you may be entitled to cardholder benefits. Let’s say you can get 30% off your purchases once a quarter; that’s a benefit you won’t want to give up.

2. Can I use the higher credit limit?

An important factor in your credit score is your credit utilization ratio, which measures how much of your available credit you’re using. The higher your total credit limit on your credit cards, the easier it is to keep your ratio in favorable territory. Although store credit cards don’t typically have high spending limits, they do add to your total limit nonetheless. And if you make minimal charges on those cards, they can improve your credit score.

What is the correct call?

Store credit cards have their drawbacks, such as high interest rates. But they also have their advantages. If you think you can benefit from keeping your new store cards, then it might be worth it.

That said, closing those cards may not hurt your credit score much, if at all. If you have a high credit limit on your remaining cards, losing the purchasing power of your store cards may not make much of a difference. Closing long-standing credit card accounts can negatively affect your score, but if your cards were opened about a month ago, that shouldn’t be a problem.

There’s nothing wrong with keeping a few store credit cards in your combination. But if you’re holding on to a card that you expect to use infrequently, keep it in a safe place. You’re less likely to spot fraudulent activity on credit cards you don’t use, but you can limit that risk by keeping them safe until you need them.

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