What If I Never Use My Credit Card?

Many individuals possess credit cards but choose not to use them, or use them infrequently. Understanding what happens when a credit card remains dormant involves examining its effects on your financial standing and the opportunities you might forgo.

Implications for Your Credit Profile

An open credit card, even without active spending, influences your credit score. Credit utilization ratio, a significant factor in models like FICO and VantageScore, measures credit used against total available credit. This ratio accounts for approximately 30% of your FICO Score and 20% of your VantageScore. An unused credit card contributes to your total available credit, helping keep overall utilization low and benefiting your score. Experts suggest maintaining a credit utilization ratio below 30% for a healthy credit profile.

Another important aspect is the length of your credit history, which constitutes about 15% of your FICO Score and around 20% of your VantageScore. Keeping older, unused credit cards open can positively impact the average age of all your credit accounts. A longer average age typically signals more responsible credit management over time, which can be favorable to lenders.

While an inactive card does not actively build new positive payment history, its continued open status contributes to the stability and depth of your credit profile. Closing an old, unused credit card can negatively affect both your credit utilization and the average age of your accounts. This action reduces your total available credit, potentially increasing your utilization ratio, and shortens your overall credit history length. Such changes can lead to a decrease in your credit score, highlighting the benefit of maintaining long-standing accounts.

Card Inactivity and Account Closure

Credit card issuers have policies regarding account inactivity, and they may close accounts that remain dormant for extended periods. Inactivity typically refers to no purchases, balance, or payments over a certain timeframe, which can vary widely among issuers. This period often ranges from 6 months to 24 months, though some accounts might remain open for several years without use. Issuers may choose to close inactive accounts because they do not generate revenue from transaction fees or interest on dormant cards.

Credit card companies are not always obligated to notify cardholders before closing an account due to inactivity. An issuer-initiated closure results in the loss of that credit line, reducing your total available credit. This reduction can indirectly increase your credit utilization ratio, which may negatively impact your credit score.

To prevent an account from being closed due to inactivity, cardholders can take simple steps. Making a small, occasional purchase on the card, such as a streaming service subscription or a small online transaction, can keep the account active. Paying off these small balances immediately ensures that no interest accrues and demonstrates responsible use. This proactive approach helps maintain the account’s open status, preserving its positive contributions to your credit profile.

Foregoing Potential Advantages

Consistently not using a credit card means missing out on various potential benefits. Many credit cards offer rewards programs, such as cash back, points, or airline miles, which are only earned through active spending. By not using the card, cardholders forfeit these opportunities to accumulate value from their everyday purchases. For instance, a card offering 2% cash back on all purchases would yield no rewards if never used.

Credit cards offer convenience that goes unused with non-use. They provide an easy method for online purchases, booking travel, or serving as a readily available payment option for unexpected expenses or emergencies. Relying solely on other payment methods might limit flexibility in certain situations. Credit cards also offer stronger fraud protection than debit cards, which remains unused if the credit card is dormant.

Regular, responsible, even minimal use of a credit card can demonstrate positive credit management to lenders. This demonstration can be beneficial when seeking new credit, as it provides a clear track record of handling revolving credit. Beyond rewards and convenience, many credit cards include benefits like purchase protection, extended warranties, or travel insurance. These protections are only accessible when the card is used for qualifying purchases.