Dear Credit Card Adviser,
I recently opened a store credit card with the intention of purchasing a television for my new apartment. When the sales associate told me I was approved, I was excited until I found out I received just a $150 credit limit. I have no use for a credit limit that low. Should I keep the card open for a short period of time and use it for a small purchase to build credit with it? Should I close it immediately without using it? What’s the best move?
— Scott

Dear Scott,
Your experience isn’t unusual. Store credit cards typically come with low credit limits and high interest rates to offset the card’s more loose credit requirements. That’s something to keep in mind before filling out a store card application to get a discount. It’s possible your initial credit limit won’t cover your entire purchase if it’s too large. Unfortunately, you won’t find out your credit limit until after you have applied and have been approved. That’s how it is for all credit cards.

If you have no other credit cards in your wallet, you may consider using this store credit card as a way to build good credit history. However, a regular credit card, either secured or unsecured, would also do the job, especially if the store card can only be used at the store. (Some store credit cards can be used everywhere.)

You may want to consider keeping the card if you shop at the store regularly. Often, stores will give special discounts or promotions for cardholders. Also, the store may increase your limit if you buy at the store often and pay your bill on time every month.

If you have other credit cards and have no use for this card, there’s no harm to your credit if you close the account. (As a reminder, any time you apply for a credit card, it will affect your score.) Closing a card with such a low limit will barely affect your utilization ratio, a key component of your credit score. The utilization rate is the percentage of available credit you use. The lower the percentage, the higher your credit score.

In your case, if you have two other credit cards, for example, with limits of $2,000 on each, then your total available credit including the store credit card is $4,150. If you charge a total of $500 on all three, then you’re using 12 percent of your available credit. After you close the store card (reducing your available credit to $4,000), your utilization rate increases to 12.5 percent — a trifling difference. (In general, consumers should aim to use 20 percent or less of their available credit.)

Another reason to think about closing the store card is to maximize any rewards you may have on other cards. Instead of charging a little every month or so to keep the store card active, you could put those purchases on a rewards card to get the very most out of your charging. You also run the risk of forgetting about that little-used credit card and its monthly payment if it’s not in the regular rotation.

So go ahead and close the card if you have other credit cards and if you don’t think this particular store card will be useful to you. Make sure there are no outstanding charges or fees on the card, and get a closing statement that shows a zero balance. You want a clean break. Good luck!

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