If You Don’t Use a Credit Card, Do You Have to Pay?

Many consumers wonder if an unused credit card can still incur costs. While avoiding new purchases prevents interest on those transactions, the reality is more nuanced. Other factors can still lead to financial obligations or impact your financial standing, even if the card remains in a drawer. Understanding these potential costs and implications is important for effective financial management.

Fees for Inactive Credit Cards

Even if a credit card remains unused, certain fees can still apply. An annual fee is a common charge for possessing the card, irrespective of spending activity. While not all credit cards have this fee, many do, particularly those offering rewards or premium benefits. For cards that do charge them, annual fees typically appear on your statement once a year, often around your account anniversary.

Federal regulations, specifically the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, banned inactivity fees for credit card accounts in the United States. Therefore, you will not be charged solely for failing to use your credit card.

Despite the absence of inactivity fees, if a credit card carries a pre-existing balance from past transactions, interest charges will continue to accrue. This interest is calculated on the outstanding balance and persists as long as a balance remains, even if no new purchases are made. Paying only the minimum amount due will not prevent interest from accumulating on the remaining principal.

How Not Using a Card Affects Your Credit

Not using a card can still indirectly impact your credit standing. One significant factor is your credit utilization ratio, which compares your total outstanding debt to your total available credit. An unused credit card contributes to your overall available credit, and keeping this limit high can help maintain a low utilization ratio if you carry balances on other cards, thus positively influencing your credit score.

If a credit card issuer decides to close an inactive account, your total available credit decreases. This reduction can cause your credit utilization ratio to increase, potentially lowering your credit score, especially if you have balances on other cards. Credit card companies may close accounts that have been inactive for an extended period.

The length of your credit history also plays a role in your credit score. Keeping older credit accounts open, even if unused, helps maintain a longer average age of accounts. If an older, unused card is closed, particularly if it’s one of your oldest accounts, it can shorten your overall credit history and negatively affect your score. Maintaining a diverse credit mix can also be beneficial, and closing a card might alter this aspect of your credit profile.

Deciding What to Do with Unused Credit Cards

Before deciding what to do with an unused credit card, consider several factors.
Does the card carry an annual fee? These charges continue regardless of use.
What is the card’s age? Older accounts positively impact your credit history length.
What is the credit limit? Its removal might affect your overall credit utilization ratio.

If you decide to keep an unused card open, a minimal use strategy can prevent it from being closed due to inactivity. This could involve using the card for a small, recurring subscription or making a minor purchase every few months and paying the balance immediately. Such consistent, small activity demonstrates responsible usage and keeps the account active without incurring debt.

Contacting the card issuer is another proactive step. You can inquire about waiving annual fees, especially if you have a good payment history, or ask about product change options, such as switching to a version of the card without an annual fee. While generally advisable to keep accounts open, closing a card might be appropriate if it has a high annual fee that outweighs its benefits or if the card tempts you into accumulating debt.