How Long After Not Using a Credit Card Will It Close?
Gain insight into how credit card inactivity affects account status and credit standing, and learn proactive steps to manage your profile.
Credit card inactivity refers to a period with no transactions on a credit card account. While the specific duration varies, credit card issuers may close accounts that remain unused for an extended time. Understanding this is important for financial management, as closures can have unforeseen impacts. Monitoring activity helps prevent disruptions to one’s financial standing.
Factors Influencing Card Closure Time
There is no universal timeframe for how long a credit card can remain inactive before an issuer closes it, as policies vary among financial institutions. Some issuers might close an account after as little as six months of inactivity, while others may allow a card to remain dormant for several years. Some banks may close accounts unused for two to three years, depending on the card product.
The type of credit card influences how quickly an issuer might close an inactive account. Store-branded credit cards, for example, might have different inactivity thresholds compared to general-purpose credit cards. A cardholder’s overall relationship with the issuer, such as having other active accounts like checking, savings, or loans, can sometimes affect the decision to close a card due to inactivity. Additionally, cards with very high or very low credit limits might be treated differently.
While some credit card issuers may attempt to notify cardholders before closing an account due to inactivity, this is not a universal practice. The Credit Card Act of 2009 requires notice for major account changes, but this does not apply to inactivity closures. Therefore, cardholders should not rely on receiving a notification and should proactively manage their accounts.
Consequences of Card Closure on Credit
The closure of an inactive credit card account can impact a cardholder’s credit score, through two main ways: the credit utilization ratio and the average age of accounts. When a credit card account is closed, its credit limit is removed from the total available credit. If the cardholder maintains balances on other active cards, this reduction in total available credit can cause their overall credit utilization ratio to increase. For example, closing a card with a $5,000 limit could increase a cardholder’s utilization from 30% to 60% if their total available credit is reduced from $10,000 to $5,000 while maintaining a $3,000 balance. A higher credit utilization ratio, especially above 30%, can negatively affect credit scores.
The average age of a cardholder’s credit accounts is another factor in credit scoring, influencing approximately 15% of the score. A closed account typically remains on the credit report for up to 7 to 10 years. Its immediate impact on average age might be minimal, as closed accounts in good standing continue to age on the credit report. However, in the long term, if the closed card was one of the oldest accounts, its eventual removal from the report can shorten the overall length of credit history. The exact impact varies depending on an individual’s overall credit profile, including other active accounts, total available credit, and length of credit history.
Preventing Account Closure
To prevent a credit card account from being closed due to inactivity, cardholders can adopt several straightforward strategies. Making regular, small purchases on the card is an effective way to signal activity to the issuer. Even a single transaction every few months is often sufficient to keep the account active. This consistent, even minimal, activity demonstrates that the card is still in use.
Another proactive measure is to automate small recurring charges to the card. Setting up a small monthly bill to be paid automatically using the card ensures consistent activity without requiring constant manual effort. It is important to also set up an automatic payment from a bank account to the credit card to cover these charges and avoid accruing interest. Cardholders can also set calendar reminders to periodically use cards that are not part of their regular spending habits, ensuring they remain active.
Finally, if there is concern about a potential account closure or to understand specific policies, cardholders can directly contact their credit card issuer. Inquiring about the issuer’s inactivity policy can provide clarity and allow for proactive steps to prevent closure. Consistent and responsible use, even if infrequent, helps maintain open credit card accounts.