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

Credit cards offer convenience and a means to manage expenses. Many individuals possess multiple credit cards, some of which may not see regular use. While leaving a credit card dormant might seem harmless, inactivity can lead to various outcomes that affect a cardholder’s financial standing and access to credit.

Impact on Your Credit Score

Credit card inactivity can influence a credit score through several factors. Credit utilization measures the amount of credit used against total available credit. An unused credit card, if kept open, contributes to overall available credit, helping to lower the credit utilization ratio. Maintaining a low credit utilization ratio, generally below 30%, is associated with higher credit scores. If an unused card is closed, total available credit decreases, which can increase the credit utilization ratio and negatively impact the score.

The length of credit history is another factor influenced by unused credit cards. Credit scoring models consider the age of credit accounts, including the oldest and average age. A longer credit history demonstrates responsible borrowing and contributes positively to a credit score. Keeping older, unused accounts open helps preserve a longer average age of accounts. If an old, unused credit card is closed, it can shorten the average age of accounts, potentially lowering the credit score.

An unused credit card contributes to a healthy credit mix. Credit scoring models assess the diversity of credit accounts, including revolving credit (like credit cards) and installment loans. A diversified credit portfolio demonstrates the ability to manage different types of credit. An open, unused credit card contributes to this mix, showing experience with revolving credit. If this account is closed, especially if it is one of few revolving accounts, it could negatively affect the credit mix.

Account Closure Due to Inactivity

Credit card issuers may close accounts due to inactivity, driven by operational and risk management. Card companies earn revenue from interchange fees when cardholders make purchases. If a card remains unused, it generates no revenue for the issuer, making it an unprofitable account to maintain. Issuers also manage credit exposure, and an unused line of credit could be reallocated to active customers.

The timeframe before an account is deemed inactive and potentially closed varies among issuers, ranging from several months to a year or more. A credit card issuer is not required by law to provide advance notice before closing an account due to inactivity. While some companies may send an alert, this is not a universal practice.

When an account is closed due to inactivity, the cardholder loses access to that line of credit. Any accumulated rewards points or benefits may be forfeited. Reinstating a closed account is not guaranteed; some issuers may allow it, but others may require a new application. This removes a financial tool, limiting immediate access to credit and any specific perks.

Ongoing Considerations for Unused Cards

Even if a credit card remains open but unused, there are ongoing considerations. One is the potential for annual fees. Many credit cards, particularly those with premium rewards, charge an annual fee. This fee is charged regardless of card use, and cardholders must be aware of these charges to avoid unnecessary expenses.

Monitoring for fraudulent activity remains essential, even for unused cards. Account details can be compromised through data breaches, and unauthorized transactions could occur. Regularly checking statements or online accounts for suspicious charges protects against financial loss and identity theft. Many credit card companies offer alerts for unusual activity, aiding prompt detection and reporting of fraud.

Maintaining updated personal contact information with the credit card issuer is important. This ensures critical communications, such as account changes or fraud alerts, reach the cardholder promptly. An outdated address or phone number could lead to missed important information.

Keeping a long-standing, unused account open can offer strategic value for maintaining a strong credit profile. Provided the card does not carry an annual fee and is managed responsibly, its existence contributes positively to the length of credit history and overall available credit. Making a small purchase periodically, such as once every few months, and paying it off immediately can signal activity to the issuer and help prevent the account from being closed due to inactivity.