What Happens If You Apply for a Credit Card and Never Use It?

Individuals sometimes apply for a credit card and then do not use it, perhaps due to changed spending habits or finding a more suitable card. Understanding the consequences of holding an inactive credit card account can help manage financial health and avoid unintended impacts.

Your Credit Score Implications

Applying for a new credit card often results in a temporary decrease in your credit score due to a “hard inquiry” on your credit report. A single hard inquiry typically lowers a FICO score by fewer than five points, and its impact on the score usually diminishes after 12 months, although it remains on the credit report for up to two years.

An unused credit card can positively influence your credit utilization ratio, which is the amount of credit you are using compared to your total available credit. By increasing your overall available credit without adding new debt, an unused card can lower this ratio, a factor that accounts for a significant portion of your credit score.

Keeping older, unused credit card accounts open can also benefit your credit score by contributing to the average age of your credit accounts. The length of your credit history demonstrates long-term financial responsibility. Additionally, an open, unused card contributes to your credit mix, showcasing your ability to manage different types of credit, which is another factor in credit scoring models.

However, if a credit card issuer closes an unused account due to inactivity, it can negatively affect your credit score. Such a closure reduces your total available credit, potentially increasing your credit utilization ratio. If the closed account was one of your oldest, it could also shorten the average age of your credit history, impacting your score.

Card Account Status and Associated Costs

Some credit cards carry an annual fee, which is charged regardless of whether the card is used. If an unused card has such a fee, it will still be charged to the account, requiring payment to avoid late fees or other financial penalties.

Credit card inactivity fees, also known as dormancy fees, are no longer permitted in the United States. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 banned these fees. Therefore, you will not be charged solely for not using your credit card, apart from any applicable annual fees.

Credit card issuers may close an account due to prolonged inactivity, after 6 to 24 months, though the exact timeframe varies among issuers. This is a business decision by the issuer to manage risk and resources, as they do not generate revenue from inactive accounts through transaction fees or interest charges. Issuers are not required to notify cardholders before closing an account due to inactivity. Even with no activity, cardholders will still receive monthly statements, which requires attention.

Security and Monitoring Unused Cards

Maintaining an unused credit card account requires vigilance regarding its security. Regularly checking the statements for an unused card is important, even if no activity is expected. This practice helps to quickly detect any unauthorized charges or fraudulent activity that could indicate identity theft. Setting up account alerts can also provide timely notifications of any unusual transactions.

Protecting the physical credit card itself is also advisable. Storing the card in a secure location reduces the risk of it being lost or stolen. Shredding any unwanted credit card offers or documents containing card details helps prevent information from falling into the wrong hands.

Even if a credit card is unused, the account information can still be vulnerable to data breaches if the card issuer’s systems are compromised. This reinforces the need for ongoing monitoring, as fraudsters might attempt to use compromised card details. Being proactive in monitoring all open accounts, used or unused, is a crucial step in safeguarding your financial information.