What Happens If You Get Approved for a Credit Card but Don’t Use It?

Receiving approval for a credit card can feel like a financial achievement, but an unused card can still impact your financial standing. Understanding these implications is important for effective financial management.

Impact on Your Credit Score

An approved credit card, even if unused, becomes part of your credit profile and can influence your credit score. One positive aspect is the potential to lower your credit utilization ratio. This ratio compares the amount of credit you are using to your total available credit. Maintaining a lower ratio, typically below 30%, is viewed favorably by credit scoring models. An additional open credit line increases your total available credit, which can reduce this ratio if balances on other cards remain constant.

The length of your credit history also factors into your credit score, and an older, open account contributes positively to this metric. Keeping an unused card open, especially if it is one of your older accounts, can help maintain a longer average age of accounts. However, if the credit card issuer decides to close the account due to prolonged inactivity, this can negatively affect your credit score.

An issuer-initiated closure reduces your total available credit, which in turn can increase your credit utilization ratio if you carry balances on other cards. This action can also shorten the average age of your credit accounts, particularly if the closed card was one of your oldest. Credit card companies may close accounts that have been inactive for periods ranging from a few months to a year or more, depending on their internal policies. This closure can occur without explicit prior warning, as some companies are not required to provide notice for inactivity-based closures.

Account Status and Potential Fees

Upon approval, a credit card account is considered open and active, even if unused. It is part of your financial record and subject to the issuer’s terms and conditions. A significant implication is the potential for annual fees, which apply regardless of whether you use the card.

Annual fees are typically billed once a year and must be paid to keep the account in good standing. Failure to pay can result in late fees and negative reporting to credit bureaus, damaging your credit score.

Many credit cards offer introductory annual percentage rates (APRs) or sign-up bonuses with specific activation or spending requirements. If unused, you will likely miss out on these promotional benefits. Issuers monitor account activity, and accounts with no usage may be closed due to lack of profitability.

Managing Unused Credit Cards

When you have an approved but unused credit card, reviewing its terms and conditions is a prudent first step. This review should specifically focus on annual fees, inactivity clauses, and the card’s expiration date. Understanding these terms helps clarify any ongoing obligations or potential costs associated with keeping the account open.

Credit card issuers may close accounts due to prolonged inactivity, with the timeframe varying from a few months to over a year depending on the issuer’s policy. This issuer-initiated closure can impact your credit utilization ratio and the average age of your credit accounts, potentially affecting your credit score. While some issuers might provide notice, they are not always legally required to inform you before closing an account for inactivity.

Deciding whether to keep an unused card open or close it involves weighing several factors. Keeping it open can benefit your credit score by maintaining a higher total available credit and a longer credit history. However, if the card has an annual fee you wish to avoid, or if managing too many open accounts is a concern, closing it might be a consideration. For cards you wish to keep open, making small, occasional purchases and paying them off immediately can prevent the account from being flagged as inactive.