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

Opening a credit card account without using it introduces a unique set of considerations for financial management. While it might seem harmless, this practice can have various implications for personal finances and credit standing. Understanding these potential outcomes is important for anyone considering or maintaining such accounts.

Impact on Your Credit Score

Maintaining an open credit card, even without active use, can positively influence credit scores. A significant factor is credit utilization, which measures the amount of credit used against the total available credit. An unused card contributes to a higher total available credit, which can lower the utilization ratio if other cards carry balances, thus potentially benefiting the credit score.

The length of your credit history, often referred to as the average age of accounts, also plays a role. An older, unused credit card can continue to age, thereby increasing the average age of all your credit accounts. This contributes positively to your credit score, as lenders generally view a longer credit history as a sign of financial stability. Having a diverse portfolio of credit types can also be seen favorably.

Not using a card is not inherently detrimental to a credit score. Negative impacts often arise from indirect consequences, such as the card issuer deciding to close the account due to inactivity. Such a closure, rather than the non-use itself, can then affect credit utilization and the average age of accounts.

Understanding Account Fees

Even when a credit card remains unused, certain financial obligations may still apply, primarily annual fees. Many premium credit cards or those with specific rewards programs assess an annual fee, charged regardless of whether the card is actively used for purchases. This fee is typically billed to the account once a year and can accumulate if not paid, potentially leading to additional charges.

Some credit card agreements may include inactivity fees, though these are far less common. Historically, some issuers charged a fee if an account had no activity for an extended period. It remains important to review the specific terms and conditions provided by the credit card issuer to identify any applicable charges, including annual fees, which are more prevalent.

Issuer Account Closures

Credit card issuers may close accounts that exhibit prolonged periods of inactivity, typically ranging from 6 to 24 months without any transactions. Issuers often close dormant accounts to manage their financial risk and reduce administrative costs. They might also close accounts as part of portfolio management strategies or if the cardholder’s credit profile changes significantly.

Before closing an account, some issuers may send a notification to the cardholder, though this practice varies widely. The closure of an account due to inactivity can appear on a credit report, indicating that the account was closed by the creditor. This action can impact credit scores by reducing the total available credit, which can increase the credit utilization ratio if other cards have balances.

An issuer-initiated closure can also shorten the average age of accounts over time, particularly if the closed card was one of the older accounts. While the account history remains on the credit report for several years, its closure means it no longer contributes to the average age of open accounts.

Managing Unused Credit Cards

Effectively managing an unused credit card involves proactive steps to prevent potential negative consequences. One strategy is to make small, infrequent purchases on the card, perhaps once every few months, to maintain activity. Even a small transaction, like buying a coffee or paying a recurring minor bill, can signal to the issuer that the account is active and prevent closure due to inactivity.

Another approach is to set up a small, recurring payment, such as a monthly subscription service, to be charged to the card. This ensures regular activity without requiring constant manual attention. It is crucial to set up automatic payments from a bank account to cover these charges, ensuring the balance is paid in full each month to avoid interest charges and maintain a positive payment history.

When deciding whether to keep an unused card open or close it, consider factors such as any annual fees associated with the card. Also, evaluate the card’s age; older accounts generally contribute positively to your credit history. Regularly monitoring all credit card statements, even for unused accounts, is important to detect any unauthorized activity or fraudulent charges promptly.