Do I Have to Use My Credit Card Every Month?

Many individuals wonder if using their credit card monthly is a requirement. No universal mandate from credit card issuers or financial institutions obligates a cardholder to use their credit card every month. This is a common misconception, as regular use, while part of a sound financial approach, is not a contractual obligation. Inactivity fees were banned in 2010.

Cardholders must adhere to the terms and conditions outlined in their card agreement. This includes making at least the minimum payment if a balance is carried, and avoiding exceeding the credit limit. Failure to meet these obligations can lead to fees and penalties.

Implications of Account Inactivity

While monthly usage is not mandatory, prolonged periods of inactivity can lead to actions by the credit card issuer. An issuer might deem an account inactive if there are no new purchases for a certain period, which can range from a few months to several years depending on the company’s policy. Although some issuers may provide notice, they are not required to do so before closing an inactive account.

An issuer-initiated account closure can impact credit scores in several ways. If the closed account was one of your older credit lines, its closure can reduce the overall length of your credit history, which is a factor in credit scoring models. Closing an account also reduces your total available credit, which can increase your credit utilization ratio if you carry balances on other cards. A higher utilization ratio can negatively affect your credit score.

For instance, if an inactive card with a $5,000 limit is closed, and you have another active card with a $2,000 limit and a $500 balance, your utilization jumps from 10% ($500/$5,000 total available credit) to 25% ($500/$2,000), potentially impacting your score. Some financial experts suggest using a card at least once or twice a year, or even quarterly, to prevent it from being flagged as inactive.

Credit Score Components and Credit Card Activity

Credit card activity, or its absence, influences various components that make up a credit score. Payment history is a primary factor, accounting for 35% to 40% of a FICO or VantageScore. Even infrequent use requires timely payments to build a positive history, as a single missed payment can significantly impact your score.

Credit utilization, representing the amount of credit used compared to total available credit, is another significant factor, comprising 20% to 30% of your score. Maintaining a low balance, even if the card is used infrequently, contributes to a favorable utilization ratio. Keeping accounts open over time, regardless of how often they are used, benefits the length of credit history component, which accounts for 15% to 21% of a credit score.

The mix of different credit types, such as revolving credit from credit cards and installment loans, also contributes to a credit score, around 10%. A credit card can diversify a credit portfolio, demonstrating the ability to manage various forms of debt. Finally, new credit inquiries and recently opened accounts, while less influential, can temporarily impact your score.