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

Credit cards offer convenience for purchases and help establish a credit history. While beneficial, neglecting their use can lead to unintended consequences. Understanding these outcomes is important for managing your financial profile. This article explores what happens when a credit card remains unused.

Credit Score Impact

Inactivity on a credit card can influence your credit score. A primary factor is the credit utilization ratio, representing credit used versus total available credit. If an unused card, especially one with a high limit, is closed, your total available credit decreases. This can inadvertently increase your utilization ratio on remaining active cards. Maintaining a ratio below 30% is recommended for a healthy credit score, as higher ratios negatively impact creditworthiness.

Length of credit history also impacts your score, accounting for about 15% of a FICO score. An older, unused credit card positively contributes to the average age of your credit accounts. If such a long-standing account closes, it shortens this average, potentially lowering your credit score. A closed account with positive history remains on a credit report for up to 10 years, but its eventual removal reduces the overall age of accounts.

Credit mix, the variety of credit types you manage, constitutes about 10% of a credit score. This includes revolving credit, like credit cards, and installment loans. Closing an inactive credit card, especially if it’s your only revolving account, can reduce your credit portfolio’s diversity. This may negatively affect your credit score. Even dormant accounts contribute to a diverse credit mix, supporting your credit profile.

Card Issuer Actions

Credit card issuers monitor account activity and have policies for prolonged inactivity. If an account shows no transactions for an extended period (typically 6 months to 2 years), the issuer may close it. This helps issuers manage risk and costs, as idle accounts don’t generate revenue. Such closures are common, especially for cards without an annual fee.

Issuers are not required by law to notify cardholders in advance of closing an account due to inactivity. While the Truth in Lending Act mandates 45 days’ notice for significant changes, this often doesn’t apply to inactivity-based closures. If an account closes, reactivating it may be possible, depending on issuer policies. However, reinstatement isn’t guaranteed, and reapplying for a new card may be the only option.

Inactivity fees, also known as dormancy fees, are prohibited for credit cards in the United States. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) made it illegal for issuers to charge such fees. So, while an unused card may be closed, it will not incur a fee for its dormancy.

Missed Card Benefits

Not using a credit card means missing out on benefits. Many cards offer rewards programs like points, miles, or cash back on purchases. Consistent use lets you accumulate these rewards, redeemable for travel, merchandise, or statement credits. Without regular transactions, these potential savings are missed.

Introductory offers, a common incentive for new cardholders, often include sign-up bonuses or promotional 0% APR periods. These offers require meeting specific spending thresholds within a defined timeframe. Failing to use the card means missing these valuable initial benefits, which can be worth hundreds of dollars in cash back or travel credits.

Many credit cards provide protections and insurances that activate only with use. These include purchase protection against damage or theft, extended warranties, travel accident insurance, or car rental insurance. Not using the card for relevant purchases means losing access to these valuable safeguards, which could result in out-of-pocket expenses for unforeseen events.

Consistent and responsible credit card use helps build a positive relationship with the issuing bank. This can lead to benefits like credit limit increases, better interest rates, or more favorable offers. An inactive account does not contribute to this positive relationship, limiting future financial flexibility and opportunities with that issuer.