What Happens If You Don’t Activate a Credit Card?

Receiving a new credit card often includes instructions for activation, a standard security step. Many individuals may wonder about the consequences of not activating a newly issued credit card. This article explores the implications of leaving a credit card unactivated, examining its usability, impact on financial standing, and security considerations.

What Happens Without Activation

An unactivated credit card cannot be used for any transactions, whether for making purchases in stores or online, or for obtaining cash advances. The card remains without operational capabilities until the activation process is completed. Consequently, no charges can be applied to the account, and no interest will accrue from card usage.

Because the card is not operational, no statement balances will be generated from spending, and no minimum payments will become due from card usage. An unactivated card does not create an immediate financial obligation for repayment. However, any annual fees associated with the card may still be charged to the account, even if the card is never activated. These fees are part of the cardholder agreement and are assessed regardless of card usage.

Impact on Your Credit Profile

Even if a credit card remains unactivated, the account is opened and reported to the credit bureaus shortly after approval. This means the new credit line appears on your credit report, impacting certain credit scoring factors.

One significant factor affected is the average age of your credit accounts. Opening a new credit card, even if unactivated, can lower the average age of all your open accounts, especially if you have a relatively short credit history. This can result in a temporary, minor dip in your credit score, as a longer credit history contributes positively to your score.

Additionally, the new credit limit from the unactivated card is added to your total available credit. This can positively influence your credit utilization ratio, which is the amount of credit you are using compared to your total available credit. A lower utilization ratio is beneficial for your credit score. However, not activating and using the card means you won’t build a positive payment history, which is a significant component of your credit score.

Security and Account Status

An unactivated credit card still represents an open account with the issuer, even though it cannot be used for transactions. The issuer considers you a cardholder, and the account is subject to their terms and conditions.

Physical security of the unactivated card is important. If the card falls into the wrong hands, the account number could still be compromised, even if direct transactions are not possible without activation. Therefore, store the card securely or dispose of it properly if you do not intend to activate it, perhaps by shredding it to protect your account details. While the risk of fraudulent transactions is lower due to lack of activation, safeguarding the account number remains a prudent measure.

Deciding Not to Activate

If you receive a credit card and decide not to activate or use it, simply ignoring it is often not the best approach. It is advisable to contact the credit card issuer directly to formally close the account. This proactive step helps ensure the account is properly removed from your financial records and prevents potential misunderstandings or issues in the future.

Formally closing the account can prevent it from remaining open on your credit report indefinitely. While closing a new account might result in a minor, temporary adjustment to your credit score due to a reduction in your overall available credit or a slight decrease in the average age of your accounts, this impact is manageable. This trade-off can be worthwhile to avoid an unwanted open line of credit that could be a target for fraud or impact your credit utilization if you apply for other credit.