If I Don’t Use My Credit Card, What Happens?

Credit cards offer convenience and can be useful financial tools, but concerns often arise regarding accounts that are rarely or never used. While it might seem harmless to simply let a credit card sit idle, this inactivity can lead to various outcomes. Understanding these potential consequences is important for managing financial health and maintaining a positive credit profile, helping individuals make informed decisions about their credit card accounts.

Account Closure Due to Inactivity

Credit card issuers define dormancy periods, which are specific lengths of time an account can remain unused before being flagged as inactive. These periods are not universal and can vary significantly among different card issuers and products, ranging from as short as six months to as long as two or three years of no activity. For example, some companies might close an account after 12 months, while others may wait up to three years.

Issuers often close inactive accounts as a business decision to manage risk and reduce administrative overhead associated with dormant lines of credit. The Consumer Financial Protection Bureau (CFPB) states that credit card companies are generally not obligated to notify consumers before closing an account due to inactivity. Therefore, a cardholder might not receive a warning before an account is closed.

Credit Score Implications

Not using a credit card, particularly if it leads to account closure, can have several effects on an individual’s credit score. One significant factor is the credit utilization ratio, which measures the amount of credit used against the total available credit. When an account is closed, the available credit limit associated with that card is removed from the total, potentially increasing this ratio if balances are carried on other cards. Lenders generally prefer to see a credit utilization ratio below 30%, with lower percentages often viewed more favorably.

Another factor influenced by account closure is the average age of accounts, which contributes approximately 15% to a credit score. If a long-standing credit card account is closed, it can reduce the overall average age of the credit history, especially if it was one of the oldest accounts. However, closed accounts that were in good standing typically remain on credit reports for up to ten years and continue to factor into the average age calculation during that period. While inactivity itself does not directly harm a credit score, the subsequent closure of an account can indirectly impact it by altering these key components.

Dormancy Fees and Other Charges

Historically, some credit card issuers imposed dormancy or inactivity fees on accounts that remained unused for extended periods. However, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 largely prohibited credit card issuers from charging inactivity fees on consumer credit card accounts.

Consumers typically will not face specific fees for simply not using their credit cards. Despite this, annual fees associated with certain credit cards still apply regardless of account activity. If a card carries an annual fee, that charge will continue to be assessed even if the card remains in a drawer and is never used, unless the account is closed.

Strategies for Account Management

To prevent an unused credit card account from being closed due to inactivity, cardholders can adopt simple strategies to maintain activity. Making a small, occasional purchase, such as buying a coffee, paying for a streaming service, or adding a small amount to an online gift card, and then immediately paying off the balance can keep the account active without incurring interest charges. Automating a small recurring bill, like a monthly subscription, to the card and setting up automatic payments from a bank account can also serve this purpose.

Regularly reviewing credit card statements, even for inactive cards, is important to monitor for any unexpected charges, annual fees, or potential fraudulent activity. When deciding whether to keep or close an unused card, consider factors such as whether it carries an annual fee, its impact on your overall credit utilization, and its contribution to the average age of your credit history. Keeping an older account open and active, even with minimal use, generally benefits a credit score more than closing it due to its positive influence on credit history length and utilization.