What Happens If You Don’t Use Your Credit Card?

While avoiding debt might make it seem responsible to let a credit card sit unused, inactivity can have various implications. Understanding these potential outcomes is important for managing your financial health and credit standing.

How Non-Use Affects Your Credit

Letting a credit card remain inactive can influence several components of your credit score, even if you are not actively using it. One significant factor is credit utilization, which measures the amount of credit you are using compared to your total available credit. An unused credit card contributes to your overall available credit, which generally helps keep your utilization ratio low, a positive signal to credit bureaus. If an unused card is closed, either by you or the issuer, your total available credit decreases, potentially causing your utilization ratio to rise if your balances on other cards remain the same.

The length of your credit history also plays a role in your credit score calculations. Older credit accounts, even those that are not actively used, contribute to a longer average age of accounts on your credit report. This longer average is viewed favorably by lenders as it suggests a stable credit history. The closure of an old, unused account can shorten this average, which might negatively impact your score, particularly if it was one of your oldest accounts.

Your credit mix, which considers the different types of credit you manage, is another component. A credit card represents revolving credit, and having a diverse mix of credit types, such as both revolving and installment loans, can be beneficial for your credit profile.

Account Inactivity and Closure

Credit card issuers may close inactive accounts for various reasons, including the cost of maintaining dormant accounts or perceived risk. Issuers incur administrative costs for each open account, regardless of activity, and an inactive account might not generate revenue through interest or transaction fees. Maintaining a large number of inactive accounts can also present a regulatory or compliance burden for financial institutions.

The period of inactivity that might trigger a review or closure varies significantly among issuers, but it commonly ranges from 6 months to 24 months without any transactions. Some cardholders might receive a notification before an account closure, often through email or mail, urging them to make a small purchase to keep the account active. However, it is also possible that some issuers may close accounts without explicit prior notification.

An issuer-initiated account closure has implications beyond just the credit score. Cardholders might lose access to any accumulated rewards points if the program terms specify forfeiture upon closure. The immediate loss of an available credit line can be inconvenient, especially if that credit was intended as an emergency fund.

Managing Your Unused Credit Cards

For individuals with unused credit cards, several practical steps can help maintain the account and its benefits. One simple strategy involves making small, infrequent purchases on the card, such as a streaming service subscription or a single coffee, and then immediately paying off the balance. This approach demonstrates activity to the issuer without accumulating debt, keeping the account open and active.

Another effective method is to link a small, regular bill, like a monthly utility payment or a phone bill, to the unused credit card. Setting up automatic payments from your bank account to cover this charge ensures consistent activity and helps build a positive payment history. This automates the process of keeping the card active while ensuring on-time payments.

It is advisable to periodically review any unused credit cards for annual fees or specific benefits that might be overlooked. Some cards offer valuable perks, cash back, or travel rewards that could influence a decision to keep the card active. Understanding the card’s features helps determine its continued value.

If a card offers no discernible value, has annual fees, or creates unnecessary financial complexity, responsibly closing the account might be a better option than letting it remain dormant. This involves paying off any outstanding balance, confirming the closure with the issuer, and monitoring your credit report to ensure the account is accurately reported as closed.